Preamble

The House met at half-past Nine o'clock

PRAYERS

[MR. SPEAKER in the Chair]

Banks (Interest Rates)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Gerald Malone.]

Mr. Greville Janner: I am grateful for the opportunity to raise in this House the problems that arise for those who borrow money from banks when the banks are not required to inform them of the rates of interest that will be charged.
Today, there are millions of people with bank accounts. That number is growing, largely because of the repeal of the Truck Acts and the removal of the requirement that a manual worker can be paid other than in cash only with his or her written consent.
There were times when bank accounts were the preserve of the wealthy and the elite — those times have gone. There were times perhaps when bank borrowers did not need to be protected because they were on equal terms with those from whom they borrowed—likewise, those times have gone.
The sad legal position is that, although most other borrowers are protected because the Consumer Credit Act 1974 laid down requirements governing the form and content of regulated agreements which, in effect, required borrowers — whether from banks, building societies, moneylenders or anyone else who lends in the course of business — to be told how much interest is being charged, unfortunately an exception applies to current account overdrafts. I believe that that wide exception was wrongly introduced by the Director General of Fair Trading. How are the banks dealing with this problem? What can be done to put matters right, not least in a debate in which legislation cannot be recommended?
I start with the importance of this matter to ordinary folk. There is a wonderful story that I hope will appeal to the Minister about an occasion in the early 1970s when merchant banks were collapsing largely as a result of major loans to those who should not have received them. One bank that did not succumb was Lazard Freres and apparently Lord Cowdray asked Lord Poole, then chairman of that bank, how it was that he had avoided making those unsatisfactory loans. Lord Poole replied, "I only lend money to people who have been to Eton."
I am sure that that would appeal enormously to the Minister, who I believe had the good fortune to have such an education, but it is an education which I believe has been denied to almost all of my 63,000 constituents and their children. Therefore, they would not have obtained a loan from Lazard Freres. However, even if the Minister had received an overdraft, for which I am sure he would qualify, I doubt whether he would know how much interest he would be charged.
This morning I spoke to a most distinguished financial journalist. I asked him, "Do you have an overdraft?" He said, "Yes, I have always had an overdraft." I asked, "How much interest are you being charged on your overdraft?" He said, "I don't know. Somewhere I have a letter from the bank showing the percentage that I am being charged above base rate, but I don't know what it is." If that applies to a distinguished financial journalist, whom I shall not name unless under the greatest provocation from him, how much more does it apply to the ordinary bank borrower?
I am sure, Mr. Speaker, that in your position you would not need an overdraft. I hope not. I cannot claim to be in the same position. I am sure that the Minister has many overdrafts. If he has, I venture to hope that with his distinguished schooling, which I have now laid bare for the House, he would know how to handle that overdraft, what he is being charged and that if he shopped around in the market place, he could probably knock down the interest rate to the lowest available to him. For a Minister educated at Eton, I think that it would be a very low rate of interest. If it were the Government, I should take a different view.
However, the ordinary bank borrower is not in that happy position. He is not used to handling complicated transactions. He does not know the questions to ask. If you, Mr. Speaker, do not know what questions to ask, you will not get the answers that one should and that the banks would be prepared to give.
I am reminded of the wonderful remark by a judge recently in court when somebody was talking about the average person. He said, "We should bear it in mind that about 50 per cent. of the population is below average intelligence." That was a monumental thought. The fact is that even if one is above average intelligence, which one would presume for anyone who obtains admittance to Eton. never mind getting out of it without having been expelled. that is likely to mean that one does not know what the banks will do and how one is likely to be ripped off if one does not know one's rights.
With ordinary authorised overdrafts, most people believe that there is a standard charge. Where there is not, most people believe that there is no point in asking for a lower rate, whereas if they asked, they would get it. Most people do not know that the banks are under no obligation to tell them what they are charging and that if they ask, they could get a reduction.
The matter gets worse when the banks produce what they choose to call unauthorised overdrafts. One can get an unauthorised overdraft by the simple process of overdrawing more than one should, probably inadvertently. Then the whole overdraft becomes unauthorised. Certainly, the part of the overdraft that is over the top would, but I suspect that it would be the lot. If one's overdraft comes to the end of its term and one does not renew it, and the bank writes and believes that one has not replied, the bank will treat the overdraft as unauthorised. At that stage, I regret to say that one can be charged almost anything that the bank manager wants to charge.
I have asked about that at various clearing banks and should like to inform the House of the replies that I have received. For example, Lloyds bank explained the situation as follows :
Interest rates for borrowing without arrangement will vary depending on our Manager's knowledge of the customer and his assessment of the risk. Unarranged overdrafts are


costly to us in administration and Managers have discretion to charge interest up to a maximum rate of 2 per cent. per month".
To most people of average intelligence, that would work out at 24 per cent. per annum, but it does not. The figure that I was given was APR 26·8 per cent. People may think that that means that in the month of April the charge is 26·8 per cent., but APR means something different.
I am pleased to say that a further journalist, a very intelligent man, whom I met this morning—but not a financial journalist—did not know what an APR was, and he had a degree. That makes it difficult for those who have neither an education at Eton nor a degree to understand, even when they are told what the position is. It gets worse. The banks tell me that they advertise. I salute the Royal Bank of Scotland for this. Apart from conveying to me the compliments of the season, the bank said that it was actively considering wider advertisement of the interest rates payable on unauthorised borrowing. In effect, as some banks do, the Royal Bank of Scotland will put on the bank's walls notices saying how the rates are charged, and it may do so in the national press.
I venture to suggest that those without adequate knowledge and perhaps even without a degree in economics, or those who are non-financial journalists, would not understand the advertisements either. If the advertisements start talking about standard rates and APR, that is beyond the ken of the ordinary average person whom I am seeking to protect—my constituents who are being ripped off by banks charging them exorbitant rates up to 26·8 per cent. per annum without telling them what the charge will be. In many cases people do not know that with the law in the ludicrous state that it is in, in the absence of agreements to the contrary, overdrafts are repayable on demand. The demand is often made in ways that ruin business.
The small business of a constituent of mine was ruined recently by precisely that method. I wrote to the banking ombudsman in the hope that he would be able to help. I received a courteous reply, enclosing a copy of his annual report for 1985–86, which contains a paragraph headed, "Disclosure of the cost of borrowing." It contains the words
While not the subject of any large number of complaints in our first nine months". 
I emphasise that people do not complain, because they do not know. One complains only if one realises that one has a right and if one believes that one is not getting it. People have no idea that they are being ripped off and that the banks are charging them higher rates than even moneylenders would be expected to charge.
The report continues:
several correspondents have complained that insufficient information is offered by banks. This subject has been covered by the National Consumer Council, and in their report on 'Banking Services and the Consumer' they recommended that banks 'should give their customers better information about the costs of overdraft'.
Indeed. At a time when computers are used to tell us what we owe, surely those same computers should be brought into action to tell us what we are being charged on that which we owe.
The report states :
The lack of information can cause confusion,"—
indeed it can—

For example, one bank customer complained to the Ombudsman that his bank statement on his loan account made him an offer of personal loans at a 'new lower APR'.
Here we are again. The report continues:
The bank intended to convey only that personal loans were on offer at a lower rate than previously applied to that type of loan. But the complainant naturally assumed it referred to his existing overdraft, and was justifiably annoyed to discover that the 'new lower APR' was actually higher than the rate he was paying!
So on the one hand the bank was saying that it would provide a lower rate and at the same time it was charging the man at a higher rate.
The ombudsman goes on to say :
We recognise the difficulties of informing customers of the APR on overdrafts when the amount outstanding and the interest rate, may vary from day to day, and when the date of repayment is undefined. Nevertheless, we suggest that banks should give some indication of the interest rate charged on an overdraft — even if only that it is at a certain percentage above base rate.
Thus, the first request that I make to the Minister is that he informs the banks that the Government are concerned, and recognise that ordinary people, and some extraordinary people, even financial journalists, cannot understand the implications of bank borrowing and the interest rate, and that the banks should now give an indication of the interest rate charged on an overdraft.
I took the matter up with the Government and received a courteous reply from the Department of Trade and Industry from the Under-Secretary of State for Trade and Industry, the Minister responsible for corporate and consumer affairs, who is now, I believe, re-arranging the banks in Japan. I drew his attention to matters occuring here and he replied that the exemption for banks and overdrafts from the unusual rules
reflects the fact that overdrafts are in general…a flexible and informal facility which offers considerable benefits to bank customers, in particular the ability to overdraw without a prior arrangement.
The Minister stated later in his letter :
it would not be obviously unreasonable for banks to provide information, retrospectively, on the rate of interest that has been charged in respect of an overdraft.
The Minister has agreed, by saying, with his usual hyperbole, "not obviously unreasonable", that banks should provide information. I believe that it would be entirely reasonable and right that the Government should lean on the banks, as only the Government can, to provide that information when that information could and should be given.
If the Government do not give the information to the banks that people are concerned, if the banks do not give information to their borrowers and if the present situation remains, in some future debate when it is within the rules of order, I shall seek to introduce legislation. Meanwhile, I refer yet again to the third port of call— that most distinguished Director General of Fair Trading, Sir Gordon Borrie, with whom I have had correspondence on this matter—who said in a letter that he
would prefer that consumers make better use of the Quotations regulations
although he is not proposing at the moment to remove the exemption for banks.
At the end of his letter, Sir Gordon Borrie states:
This is an area that my Office will continue to monitor, particularly since building societies are now able to provide current account overdrafts and to benefit from the Determination.
In other words, the determination that there should be an exemption for overdrafts obtainable from banks, has now


been extended to other lenders to whom it was not originally intended to apply — in other words, to building societies. As the number of moneylenders— by whatever name — grows, so the exemption extends its scope and as it extends, so the Government should move in to narrow that scope.
The law in the Consumer Credit Act 1974 gives the Director General of Fair Trading the power that he has exercised. He has exercised it in the belief that in so doing he would be helping the consumer to obtain overdrafts under a system that he believed should be flexible. The system is not working properly. It is not protecting individuals.
There used to be a saying: "Neither a borrower nor a lender be." Few of my constituents are not borrowers. Anyone who owns his own house, borrows. People with mortgages and bank overdrafts are borrowers. People who use credit cards and those who borrow privately, as many are forced to when they are short of money, are borrowers and affected by that area of law. People are therefore outside that worthy old proverb. It cannot be avoided. Therefore, in the old days the Government were free to stand by and allow people to deal with each other, business man to business man, Lord Poole to Eton graduates. Today, ordinary people require protection from the law.
When the overdraft comes to an end and the time for the advance comes to be repaid, banks should do far more than at present to inform people. It is not enough, for example, for a bank to write a letter to a customer saying, "Your limit was agreed for the year ending on such a date; do you wish it to be renewed?" If the bank receives no reply, it should not treat the matter as an unauthorised overdraft and charge up to 26·8 per cent. interest without even informing the customer that the rate is to shoot up in that totally unconscionable way.
Nor is it enough, in my view, for ordinary people to be protected by the law as it stands without Government intervention to warn them about the end of overdrafts. People do not generally realise the power that lies in the hands of the bank manager where an overdraft, in the absense of agreement to the contrary, is repayable on demand. Happily, most bank managers exercise their great power with discretion most of the time. However, there are exceptions, and when the exception arises, the law protects the bank, not the individual. The Government protect the bank and not the individual.
Before the Minister leaves for his well-earned Easter recess, I want him to look at this problem with some care from the point of view of ordinary borrowers who do not understand the law, who do not know what banks can do to them or what interest they are being charged. I want him to consider the problem with regard to those who do not know that they can shop around for lower interest rates and get them and who do not understand that, even if there is an advertisement advertising a standard rate, that will not protect them.
Those people will not know their rights. It is the Government's duty to inform them of their rights. It is also the Government's duty to require the banks to behave decently, honourably and well towards the ordinary borrower. If that does not work, it will be the duty of the House to ensure that the Director General of Fair Trading removes the exemption for banks. If he does not do that, the law should be changed.

The Minister for Trade (Mr. Alan Clark): I must admit that I have some sympathy with the case that has been argued by the hon. and learned Member for Leicester, West (Mr. Janner), in spite of the intermittent undertones of the class war with which he laced his discourse. Even Etonians suffer from time to time from the bad manners, incompetence and arrogance of banks. Perhaps Lord Poole's restriction was unduly restrictive. I would have preferred to stand it on its head; had I been in his position, I would have lent freely other than to those who had been to Harrow.
We must all remember that, although there may be an element of, as the hon. and learned Gentleman termed it, "rip-off — I would not echo that — or financial inconvenience attached to those who make feckless use of intermittent overdraft facilities that are not clearly or closely agreed, the alternative might be that the cheque was returned without being met. People would have to ask themselves whether they would welcome a position in which banks returned cheques more often and caused the embarrasment and dislocation that might arise as a result.
In general, I agree with the hon. and learned Gentleman. It is desirable that all those who borrow money should be fully aware of the cost of any credit that is made available. That is one of the main purposes of the Consumer Credit Act 1974. It requires, among several other things, that the annual percentage rate of charge — the APR — should be given in most credit arrangements and advertisements. That is intended to ensure that not only is the customer aware of the cost of the credit agreement, but that he has a means of comparison between one source of credit and another. That is the shopping around which the hon. and learned Gentleman said was desirable. I agree with him.
The hon. and learned Gentleman said that those provisions of the Consumer Credit Act do not apply to bank overdrafts. Overdrafts are not totally exempt from the Act, but section 74 provides that agreements which permit a consumer to overdraw on a bank account may be exempt from Part V of the Act, where the Director General of Fair Trading so determines. The exemption means that the lender need not comply with most of the documentation requirements of the Act, although other important provisions of the Act, such as the right to early termination, rebate and protection against extortionate credit, are still available to the borrower. Of course, advertisements by banks will have to quote the APR.
Section 74 provides that the Director General may exempt such agreements subject to such conditions as he sees fit to impose, but only if he believes that it would not be against the interest of debtors for him to do so. It is perhaps worth pointing out that the original exemption in the Act was slightly narrower than at present, in that exemption would not have applied when any term of the agreement was expressed in writing. It was the Labour Government in the Banking Act 1979 who broadened the scope of the exemption by repealing this requirement, in recognition of the need to provide lenders with a clear and unambiguous exemption.
In November 1983, the Director General issued a determination which exempted bank overdrafts from part V. The view taken by Parliament in providing for this exemption and, no doubt, the view taken by the Director General in granting such an exemption was that, far from


harming consumers, it would be to their advantage. That is because a bank overdraft is a flexible and informal facility which offers considerable benefits to the customer, especially the ability to overdraw without prior arrangement with the bank. The House will be aware that, typically, a personal overdraft represents an anticipation of salary by a customer and lasts—or so he hopes—for only a very short time, often no more than a day or two.
That has not applied to any of my overdrafts; perhaps the hon. and learned Gentleman shares that experience, but ideally, the overdraft lasts for no more than a day or two until the next pay cheque is received. Of course, sometimes the customer, unless he keeps a very close track of his affairs—I suspect that this applies to most hon. Members—may be unaware that an overdraft has been created until he receives his next bank statement. Indeed, someone who shares my apprehension at my bank statement, and flinches to such an extent that he does not open it, may be unaware of the overdraft until much later.

Mr. Janner: The Minister should give it to his wife.

Mr. Clark: That is exactly the solution that I adopted some years ago, but it is sometimes easier to resist the reproaches of one's bank manager than the wrath of one's spouse.
Notwithstanding the arguments of the hon. and learned Gentleman, I believe that it would be wrong to remove the exemption and thus require banks to document all overdrafts in line with the provisions of the Consumer Credit Act. To start with, it would impose extra costs on the banks, for which the customer would no doubt pay, in the end, through higher charges. More importantly, it could seriously inhibit the present flexible arrangements which offer considerable benefits to bank customers.
That is the convenience which many people, sometimes unwittingly, enjoy when they issue a cheque, not knowing precisely how much money is in the account, but confident —or, at any rate, optimistic—that the bank will meet it. If those flexible arrangements suffered from administrative intrusion, there would be a danger that they would contract.
The hon. and learned Gentleman said that all his constituents were borrowers—

Mr. Janner: No.

Mr. Clark: In that case, I apologise to the good burghers of Leicester.

Mr. Janner: The majority of them.

Mr. Clark: The majority of his constituents are borrowers. I do not know whether they would thank him if, being random, casual borrowers, they discovered that, due to his powerful advocacy, arrangements were put in place which greatly restricted the facility with which they could borrow. If a bank had to comply with all the requirements of the Consumer Credit Act every time an overdraft was entered into, it would involve the drawing up of a written agreement that would have to be sent to the customer for signature and returned to the bank.
As all of us would agree, the issuing of a cheque is often spontaneous. It must then go through a process which, regrettably, seems to take a short time, and if this procedure was followed, there would be a somewhat accelerated process in which the bank would have to

contact the customer and quickly draw him into a written agreement before it met the cheque. The only alternative might be not to meet the chewue, which would create embarrassment and inconvenience to the customer and to the person to whom he had issued the cheque, who could be another constituent of the hon. and learned Gentleman.
Given the way in which the existing arrangements operate, such a procedure would not be practicable, since a customer may often be unaware that a transaction gives rise to an overdraft, and there is no contact between a bank and the customer, or it is difficult to make contact, which would cause delays. The result would be that banks might decide to cease to make overdraft facilities so widely available. In some circumstances, they might decide to refuse to honour cheques. I am sure that the majority of bank customers would not want that.
None the less, I do not suggest that the present provisions should be regarded as set in concrete. My Department has been reviewing the working of the Consumer Credit Act, and my hon. Friend the Under-Secretary of State with responsibility for corporate and consumer affairs will wish to consider whether section 74 is working as intended, taking into account the views expressed by the hon. and learned Gentleman, similar comments that were made by hon. Members during the passage of the Banking Bill and the views of the banking ombudsman in his first annual report.
My Department already has it in mind to make one change to the treatment of overdrafts under the Consumer Credit Act. It will affect the treatment not of the inadvertent overdraft, but of those overdrafts which are agreed in advance between a bank and a customer. In that case, the overdraft is more akin to a bank loan, which would be fully regulated by the Act. We agree that it is reasonable that customers who enter into such agreements should be fully informed of the main terms of the agreement, including the cost of credit. That is why we are prepared to agree to provisions in the consumer credit directive, which was formally adopted on 22 December last year, which will require information in respect of such agreements, including the cost of credit, to be notified in writing to consumers. It is likely that the requirements will be effected by a variation in the terms of the Director General's determination; my Department and the Office of Fair Trading are currently considering that. [Interruption.]
I am glad to hear the hon. and learned Gentleman indicate his assent, as I consider this a sensible move. He says that it is a start. Whether it will be possible to go all the way in the direction for which he argues — and whether that would even be desirable—I cannot say at this stage. However, to do as much as we propose will bring the arrangements into line with the aims of the Consumer Credit Act.
I hope that the hon. and learned Gentleman will find that helpful. However, for the reasons that I have given at length, I cannot consider amending section 74 of the Act to remove the present exemption, or indeed asking the Director General of Fair Trading significantly to alter the scope of the exemption available under his determination. There are strong arguments, which I have outlined, in support of the present arrangements; nor is my Department aware of serious consumer disadvantages in relation to overdrafts.
The hon. and learned Gentleman cited a number of cases, but he was not particularly specific. As I do not have


the advantage of having engaged in correspondence with him or of having seen copies of his correspondence with my hon. and learned Friend the Under-Secretary of State for Trade and Industry, I do not know the extent to which he has illustrated his arguments with particular cases of hardship or—as he seemed to imply—the exploitation of those who unwittingly become involved in over-extended commitments. The more of such material that can be produced, the more momentum there will be behind the arguments.
I accept that it might not be unreasonable for banks to provide retrospectively some information on the rate of interest applying to an overdraft. I understand that, at present, information on the rate of interest charged by a bank is displayed in its branches, and that it is also made available to individual customers on request. It is possible that, following the report of the banking ombudsman, the banks will see fit to go further, and perhaps to provide information on the rate of interest applying to an overdraft in regular statements.
I should regard that as a very welcome development, and I shall ask my officials to discuss the possibility with the Committee of London and Scottish Bankers. Certainly some foreign banks operate the practice. I do not know whether any of the hon. and learned Gentleman's constituents have hank accounts in Switzerland, but it is possible that some of his clients do. If so, they will know that Swiss banks display on a daily basis the level of interest charged and the amount involved. The hon. and learned Gentleman can draw from that whatever inference he chooses.
The scope of the exemption granted by the Director General of Fair Trading under section 74 of the Act is very much a matter for him to decide. I know that he has been approached by the hon. and learned Gentleman, and that he is considering, together with the office of the banking ombudsman, whether there is a case for revising the determination that he granted in 1983. It is open to the Director General to vary the terms of his determination, perhaps to require certain minimum information to be provided to customers, and my Department will be keeping in close touch with his office. We share the objective of ensuring that the provisions of the Act operate in a way that is ultimately beneficial to consumers, while also recognising the risk that detailed regulation may be counter-productive.

Mr. Janner: Let me first thank the Minister for his statement, and for the two positive steps that it takes in the direction that I have recommended. Meanwhile, will he be good enough to tell the banks that the Government will keep a keen and beady eye on the advertising of interest rates and the way in which it is done, to ensure that the meaning of such advertising is clear?

Mr. Clark: No doubt the banks will read the Official Report carefully and draw the conclusions that they consider appropriate.

Highway Code

Mr. Cranley Onslow: I am glad to have the opportunity to raise with my hon. Friend the Parliamentary Under-Secretary of State for Transport a matter which is fairly simple on the surface, and which I hope will be susceptible of a simple solution.
No doubt, Mr. Speaker, you are fully familiar with the highway code. You will, therefore, know that if you read it carefully you will find a reference to the need for motor insurance—although it is the only reference that I have been able to detect. It appears on page 66, in fairly small print, and forms part of the advice to drivers of motor vehicles that, before driving, they should ensure that
your use of the vehicle is properly insured and that there are no restrictions in the relevant insurance policy…which would make your use of the vehicle illegal".
I want to ask my hon. Friend whether "properly insured" in this context really means what it says. His defence will rightly be that "properly" in such a context means that the legal requirements are satisfied. Most of us know that, provided that a driver has a third party policy, generally speaking he can drive legally on the open road. He will not be covered as fully as he might be if he had a comprehensive policy, but those policies are rather more expensive to take out, because they provide much wider cover. The difference between third party and comprehensive policies is well known, and motorists of all ages are probably well equipped to make the appropriate choice according to their needs and means. However, I doubt whether many motorists realise that comprehensive insurance is not quite what it says.
Many of us are now aware of a scheme run by the Motor Insurers Bureau whereby, in the event of an accident causing injury which results from the action of a driver who is negligent but who is not insured, an additional element of cover is provided over and above what the motorist may have taken out for himself. However, the position on which I want to focus my remarks is that in which the driver is insured but is not negligent. That was brought to my attention recently by a constituency case; I followed it up, and it has led on to others.
Let me briefly give some details of that first case. On 4 March last year, a constituent of mine, Miss Samantha Tremayne, had her R registration Cavalier written off in an accident. She was not in the car at the time; it was parked outside her home in Station road, West Byfleet, when another driver—also a constituent of mine—drove her car into it after suffering a sudden stroke. She was taken to hospital, where she had another more serious stroke, and later, most unfortunately, died.
The driver's insurance company refused to accept liability for the accident, on the ground that no negligence had been involved and that there had been no reason to suspect that the unfortunate lady might suffer a stroke. The case went slightly further: the driver's executors were advised that to meet a claim for Miss Tremayne against the estate might prejudice their own claim against the insurance company. My constituent, who was covered only by third party insurance, was thus left facing a loss of about £600. Her solicitors were quite unable to persuade the other insurance company to meet the loss. Miss Tremayne summarised it to me in a letter in which she said:


I have been told by a solicitor that I have no legal claim to the Insurance Company, because in their eyes, it is classed as an 'act of God."'
I heard about the case in October 1986 and contacted Lloyd's about it, but without any success. I was told that if Miss Tremayne had taken out comprehensive cover, she could have had her claim met, probably by her own insurance company under an indemnity. A letter to me from Mr. Presland, a Lloyd's consumer inquiries officer, contains this sentence:
Regrettably Miss Tremayne chose to take only restricted insurance cover in her own right and to rely upon her common law rights of recovery for recompense in respect of damage sustained to her vehicle as a result of the negligence of another. Had she taken out Comprehensive cover, she could of course have sought recompense from the insurer on an indemnity basis.
The consumer inquiries officer said that the case did not involve Lloyd's, and that Lloyd's did not think that the insurance company had acted unreasonably or unfairly in refusing to meet the claim.
The point about having a comprehensive policy is relevant. It is also relevant that such a policy would have cost this young lady, a 19-year-old office worker, about £300 a year. She felt, understandably, that that was more than she could possibly afford. In the end, she was lucky. The executors of the other driver agreed to make an ex-gratia payment from the deceased's estate, but Miss Tremayne still felt that her experience revealed a very unsatisfactory state of affairs. I was glad to take it up on her behalf with Ministers.
In their replies to my letters, both the Lord Chancellor and my hon. Friend the Minister expressed their sympathy, but they said that there was nothing that they felt could or should be done. In particular, they both resisted any suggestion that the law of liability should be amended to provide a no-fault scheme for compensation in cases of personal injury or property damage.
I should be out of order, Mr. Deputy Speaker, if I sought to pursue the need for legislation for such a scheme. I realise that there are good reasons why it may not be so desirable as it appears to be on the surface, but it is right that I should try to press the matter further, if only to alert more people to the kind of risks that they may run.
My constituent also says :
How can it be fair to a person, for their car to be parked outside their own house and written off, to then find there is no legal claim—surely this cannot be right.
Miss Tremayne is not alone in feeling that way. Having taken certain steps to interest the local press in the case, I received a letter from a gentleman who lives not far away in Weybridge, who told me of an incident that he described as follows :
My son's car was damaged while parked, when an unfortunate man died at the wheel of his car, crashing through my front fence and coming to rest in my garden. Due to the bad publicity in a Sunday newspaper the Insurance Co. eventually paid up, although previous to this a solicitor could not help.
That is another way of dealing with the problem. I was glad to learn that that case had ended so well, although I was interested to hear that it had happened in 1973. As my hon. Friend the Minister must therefore be aware, this is a long-standing problem.
Closer to home—indeed, only last week after I had asked for the opportunity to raise this matter on the Adjournment— I was extremely interested to receive a

letter from an engineering company in my constituency telling me of a very similar case that it had recently experienced. The managing director of the company has been kind enough to send me copies of two letters on the subject. The first is a letter from the insurance company to the solicitors. It says:
we have now received our Engineer's report following the inspection of your vehicle and note that it has unfortunately been rendered beyond economic repair. Our Engineer has placed a pre-accident value of £325 and £335, with a salvage that should realise between £25 and £30. However, the accident circumstances were that our Insured suffered a blackout and thus collided into the rear of your vehicle. We have since been advised that our Insured driver…has undergone a series of tests and was found to be suffering from a brain tumour, and is undergoing surgery. The circumstances are such that our Insured was unaware of his illness prior to the accident, and therefore you will appreciate that we are unable to accept responsibility, in view of the fact that our Insured has not acted negligently.
That letter prompted a fairly pointed response from the engineering company, which the managing director has copied to me. It says :
we have taken the trouble to take legal advice ourselves, and the advice that we have received confirms the insurers' position…However, we were under the mistaken impression that we were paying a large amount of money to Blue Chip Insurers for comprehensive cover under any circumstances. A glance at our records will show that this particular policy has been very profitable to the insurance company and they could well afford to meet this claim in full and still show a handsome profit over the years. The third party is a seventeen year old toolmaker apprentice who is being forced to take a taxi to work because there is no other form of public transport available and he does not have the money to repair his vehicle.
That is quite as bad a case as the one that I originally quoted. In some respects it is rather worse. The case has not been resolved, although I very much hope that it will be resolved, either as a result of my reference to it today or as a result of correspondence that has already been embarked on between those concerned.
I suspect that there are a great many such cases but that they may not all have come to light. Perhaps this debate will have the effect of bringing more of them to light. If it does, I welcome it.
I have further evidence to put to my hon. Friend the Minister. By chance, I have heard of another case. A man and his wife were driving along the motorway in April 1986 when the car that was overtaking them suffered a burst tyre, collided with their car and turned it completely over. They ended up on the hard shoulder, mercifully uninjured, although they were severely shaken. Their car was virtually a write-off. They had only third party fire and theft cover. The insurers of the other party said that their driver had not been negligent and that they were under no obligation to meet the costs of the accident and the writing off of the car.
None of the cases that I have quoted involved injury. My hon. Friend may tell me that had injury resulted from any of these incidents, the position might have been different. Of course, it might have been different for a variety of reasons. The accident victimes might have had cover against personal injury. The Motor Insurers Bureau, or Lloyd's, might have taken a different view. The case might have been pursued in court on the grounds that, although negligence was denied there must have been negligence.
When discussing this matter with friends in the legal profession, I heard of a case some years ago in which a


milkman on his early morning round drove in the dark into a tree that had been blown across the road. He was quite severely injured. After a great deal of diligence on the part of the legal experts, his counsel was able to establish in court that the owner of the tree was negligent, in that he had not inspected the tree in question regularly enough to be sure that it would not fall across the road.
In cases of that kind there is a great deal at stake. Personal injury accidents can result, rightly, in substantial damages. In many cases the threat of legal action is probably sufficient to result in a settlement out of court. However, in cases where the sums involved are relatively . small — for example, under £1,000—very few people would be advised to incur the expense of going to law. In most cases, if not in all, it has to he written off as sheer bad luck. The unfortunate victim is left wiser but sadder and knows, as a result of his own bitter experience, what he ought to have been aware of and what he should have been told at a much earlier stage.
As I have said, I am not arguing the case for a no-fault compensation scheme. However, I know that there is some consultation at Government level about the adequacy of our existing insurance arrangements. In fact, I have been fortunate enough to obtain a copy of a Department of Transport press notice, No. 451 of 10 October 1984. I am sure that my hon. Friend will be instantly familiar with it because it releases comments made by him about the extension of compulsory motor insurance to liability for property damage. I remind my hon. Friend that on that occasion he said :
My Department is canvassing opinion on changes to extend our compulsory insurance laws to include liability for property damage, in response to an EC Directive which aims to achieve a measure of harmonisation of motor insurance laws throughout the Community. The Directive must be implemented by the end of 1988, but I want to secure improvements to our domestic motor insurance arrangements well before then. I look forward to the proposed extension of compulsory insurance and of the Uninsured Drivers Agreement with the Motor Insurers' Bureau. I want to ensure that accident victims can generally expect to be compensated for damage to their property—including, of course, their vehicles—caused by negligent drivers, even where the driver responsible is uninsured.
I return to a point that I made earlier. I want to ensure that accident victims can generally expect to be compensated for damage to their property and vehicles caused by drivers who are not negligent but whose insurance companies say that they are not prepared to accept liability for the accident, retreating behind the act of God defence.
My first request is that my hon. Friend should enter into further discussions on that in the near future with the insurance industry. However, until those discussions bear fruit, as I hope they might, I should like to ask him one other thing. Will he take some action to ensure that drivers are warned of the risks that they may quite inadvertently run, especially young drivers, who the insurance companies think are the worst risks and who are thus faced with the highest premiums? They should be able to make an informed judgment about whether it is worth taking out comprehensive rather than third party cover. The insurance companies that provide cover, especially for young motorists, might turn their attention to doing something to fill that gap.
This problem should be known to people. I may not be right, but it seems that the highway code is the right place in which to put such a warning. I realise that a new edition

of the highway code has just been published and that it would be expensive to demand that it be reprinted. However, on another occasion, I might have a go at the Minister about the curious omission from the highway code of any advice and guidance about driving in the dark. That has surprised me now that I have studied the code as carefully as I have as, I am sure, Mr. Deputy Speaker, you always do. However, if the highway code is not the right place for a warning, may I ask that a warning should still be given and that the drivers should be allowed to make the choice in an informed state of mind, rather than in total ignorance.
If, at the end of the day, public pressure builds up to a point where the insurance company are obliged, or think it right, to revise the forms of cover that they offer, that would not be a bad thing. However, it is a bad thing that in such cases anyone can take refuge in legal technicalities, when the right answer is a change of attitude.

The Parliamentary Under-Secretary of State for Transport (Mr. Michael Spicer): My hon. Friend the Member for Woking (Mr. Onslow) has given the House a valuable opportunity to consider a subject which. as he has said, causes a good deal of understandable concern to the unfortunate few who find themselves in similar circumstances to his constituent, and to the other cases that he mentioned. Mercifully, I am informed that there are few such cases. However, my hon. Friend mentioned and has written to us about, several of them. We would welcome details of the third case that he mentioned, relating to the engineering firm because, from what he said, that case seemed to involve comprehensive insurance and damage to the insurer's own vehicle, which damage should, perhaps, have been covered. Perhaps my hon. Friend could give us further details about that.

Mr. Onslow: I shall be glad to do that. Part of the problem is that the victim of the accident was riding a small motor cycle and was run into from behind by a large truck. The truck did not suffer any damage. However, even if the truck had been damaged, I am not sure that my hon. Friend would be right in thinking that that carried a contingent liability to pay for the damage to the motor cycle.
My hon. Friend said that there are few such accidents. If he has evidence to that effect, I hope that he will let the House have it now. However, if he does not have any real evidence about how many such accidents occur, I hope that he will undertake to ensure that some steps are taken to establish the facts. I suspect that if, in a short time in my constituency, I can find two cases within 12 months, there must be about 1,000 cases at any one time in the country.

Mr. Spicer: As my hon. Friend has already said, one of the benefits of this debate is that it may well raise the level of public knowledge about such matters. At the moment, all I can say is that we are informed that motor accidents in which nobody has been negligent are rare. However, as he has implied, there is no reliable record of their number. We have to go on the fact that the Association of British Insurers, which draws on the experience of most motor insurers in the United Kingdom, has confirmed that cases in which there is no negligence are rarely brought to its


attention. I repeat that it may well be that, as a result of this valuable airing of the subject that my hon. Friend has initiated, we may receive better information on the subject.
It goes without saying that, like my hon. Friend, I have great sympathy for people who find themselves in the unenviable position of having suffered injury, or had their property damaged in an accident, and have nowhere to turn to for compensation. My hon. Friend is right to draw attention to an aspect of the law of liability, which is not widely known. Some people may, as a result of the debate, be in a position to take out their own insurance to protect themselves against the monetary consequences of such an accident.
The principle from which the problem arises goes beyond motor insurance, which is my Department's responsibility. The law of civil liability relates to accidents of all sorts, and is primarily a matter for the Lord Chancellor. It may help if I take a few moments to outline the legal position.
It is a fundamental principle of British law that payment of compensation following an accident depends on proof of negligence by the person claimed to be responsible. There is no automatic right to compensation simply on the grounds that the victim of the circumstance was himself or herself free from any blame. Whether the allegedly responsible person has third party insurance does not affect this over-riding principle. Either he is responsible for the accident or he is not. If he is, he is liable to compensate the person who has suffered loss. He may do so from his own pocket, or call upon his insurance, where he has it.
That is not confined to accidents involving motor vehicles. Where injury or damage is caused in other ways, say a tile falling from a roof, the same principle applies. To sum up, whatever the insurance position, the victim has no legal right to compensation until negligence has been established. When we extend compulsory insurance to property the principle about negligence will be unaffected. Indeed, it is unaffected by the present compulsory legislation with respect to injury.
That brings me to the specific area of difficulty that my hon. Friend has identified. His constituent was involved in an accident in which her parked car was written off when another car ran into it. Fortunately, she was not injured. So far as I am aware, there was no suggestion that my hon. Friend's constituent was in any way at fault.

Mr. Onslow: indicated assent.

Mr. Spicer: My hon. Friend confirms that. But there was equally no suggestion of negligence by the other driver involved : she suffered an unpredictable stroke at the wheel. The accident was classed as what is sometimes known as an "act of God", and so my hon. Friend's constituent received no compensation for the loss of her car from the other driver's insurer.
I readily sympathise with the apparent injustice which my hon. Friend's constituent sees in her situation, and I can understand the feeling that insurance companies should be required to pay in such cases regardless of any proof of negligence. After all, as my hon. Friend said, they look big enough to bear such a burden without really noticing it. But this supposes a direct relationship between

the victim of the circumstance and someone else's insurer. Such a connection does not exist unless it is established through the someone else being at fault for the accident.
An insurer and his policyholder are parties to a private contract under which the insurer, in return for the premium, undertakes to meet the policyholder's liabilities under civil law. In the sort of case my hon. Friend has described, no such liability arises, the contract places no obligations on the insurer, and there is no basis for a connection between the insurer and the person who has suffered damage.
I recognise that my hon. Friend's purpose in raising this subject today is not to suggest that insurers behave improperly under the law as it stands, or in relation to their contractual position. Rather he is suggesting that either the law should be changed — that was implicit in his opening remarks—or, at least, that road users should be warned of some of the pitfalls which exist for accident victims. I shall return to that point.
So far as changes in the law are concerned, I can understand from the blameless victim's point of view the attraction of a system that would avoid the sometimes uncertain process of proving negligence. But this would be a major departure from a long established principle, which could not be considered in isolation from the repercussions for other types of accidents. My hon. Friend specifically said that he was not arguing for a no-fault scheme, but it is worth dwelling for a moment on the proposals which have existed for such a scheme.
The House will recall that this question of paying compensation without establishing negligence was among those covered in 1978 by the royal commission on civil liability and compensation for personal injury under the chairmanship of Lord Pearson. The royal commission had in mind a central compensation fund, financed from a levy on the price of fuel. Accident victims could be compensated from this fund according to the extent of their injuries without taking negligence into account. The need to prove negligence following a road accident would be removed, at least for the initial entitlement to compensation.
The royal commission's proposals were not designed to cater specifically for the sort of case that has led to this debate today. They dealt with injury, not damage to property. But they are highly relevant to my hon. Friend's concerns in that they reflected the commission's more general criticisms of the law which requires proof of negligence as a basis for the payment of compensation.
Even if such compensation arrangements were restricted to road accidents they would have involved considerable costs. The Department of Health and Social Security estimated that about 1,000 staff, including 200 doctors, would be needed for the full implementation of such a no-fault scheme — and that is only for motor accidents.
Groups representing the disabled made the point forcefully that the proposed scheme would effectively discriminate between those killed and injured on the roads and other accident victims. Extending the scope of the system further to accommodate cases of property damage would exacerbate those particular problems, and the discrimination which disabled groups have seen would be implicit.

Mr. Onslow: A reason why I said specifically that I was not arguing for a no-fault compensation scheme was that


when my hon. Friend wrote to me he set out the line of argument that he has just deployed in the House. It may help him to know of a further and even more powerful persuader in the form of the Lord Chancellor, to whom I wrote on the same subject. He said that if a no-fault compensation scheme were introduced here
it would certainly lead to vastly increased premiums, and questions like contributory negligence and causation would inevitably arise.
That would open the way for additional man hours in the legal system, so clearly we need a better, simpler solution which does not involve a great deal of litigation.

Mr. Spicer: It is always useful to hear the Lord Chancellor's wisdom. The way he spares the use of legal time, in this instance as in others, is commendable. Nevertheless, as my hon. Friend raised the subject I felt that it was worth reminding ourselves about the possibility of such a scheme and of its disadvantages.
My hon. Friend suggested that road users should at least be warned of the difficulties that they could face in an accident which is nobody's fault. In particular, he suggested that the highway code could integrate such a warning, and in many respects that suggestion is attractive. As he said, the highway code is widely available and is directed not only at drivers, but a complete range of road users. The section entiled "The law's demands" already gives advice on insurance cover required by law, but, as my hon. Friend rightly said, the highway code focuses on the legal requirement for insurance.
However, my hon. Friend has said that the advice should go rather further than simply pointing out the legal requirement, and that is where we get into some difficulties on this method of advertising the problem. The highway code reminds motorists of the general need for insurance as well as for licensing, testing, taxation and so on. Insurance is part of the range of legal requirements that it puts into the small print. However, it is not designed to give detailed advice on these matters. It is a code of behaviour, rather than a do-it-yourself legal guide.
My hon. Friend will know that a revised version of the highway code has just been published. The amendments are almost all about improving safety, and my hon. Friend has given some advice to the House, which I will pass on to my hon. Friend the Minister who is responsible for roads. The code covers a number of new aspects of driving such as drinking and driving, car telephones, child restraints and so on. However, motorists need much more specific advice on insurance than that which a code of behaviour can give. They must have advice that takes into account individual circumstances and requirements. The insurance companies are willing to give such advice and it is part of their business to do so.
This debate will have helped to reinforce the need for motorists to think carefully about precise insurance needs and to ask themselves whether there are gaps in those needs. One of them may be the problem, raised by my hon. Friend today of whether there is any negligence involved. Even bearing in mind that the majority of the country reads Hansard the day after our debates, my hon. Friend will accept that not all motorists will, tomorrow morning, have the benefit of studying his advice. Therefore, there is a case for the Government giving wider publicity to the problem.
Today I have asked the driver and vehicle licensing centre at Swansea to consider including with the vehicle licensing reminders advice on the considerations that

drivers need to take into account when buying insurance. By this means, we can provide a great majority of drivers with basic advice on which to base their decisions on whether to purchase insurance to protect their own interests should they be involved in the kind of accident about which we have heard today, and the circumstances that might apply.

Mr. Onslow: That last point is a welcome development, but I wonder whether my hon. Friend could not do slightly more than send a reminder out with the motor vehicle licence renewal form. By the time one comes to renew a vehicle licence, one will have been driving for 12 months and if one is driving a car that one does not own, one will never see the form.
Having hastily fished my driving licence out of my pocket and seen that it still has a few years to run, I will not recommend that the advice that my hon. Friend so wisely decided to make available should be sent with driving licence renewal forms. However, we could append such advice to the driver licence application forms in the first place. As soon as a driver applies for his first licence, he will be made aware of insurance. That is the moment when he first goes on the road and when he is first at risk, and it would seem sensible to give him all the information then and not a year later, when he comes for renewal of his provisional licence or upgrades it for a full licence. Perhaps my hon. Friend will have a word with the DVLC about that possibility.
I suspect that one of the reasons why the instance of this type of problem is thought to be rare is that people do not press the point with the insurance companies, and the police never get to know about the accident figures because non-injury accidents do not figure in police statistics. A sampling exercise would be justifed, and I hope that my hon. Friend will feel able to pursue that matter as well.

Mr. Spicer: Those are useful suggestions, and I will consider the sampling exercise point. I am not sure how one would set about that, given, as I understand it, the small base from which one would be working. One would have to carry out a large exercise to pick up any focus on the small amount of data that would he forthcoming.
I shall consider my hon. Friend's suggestion about including this advice on the licence application form. There are two considerations that have come to me about that, off the top of my head. The first is that with the age-to-70 licence, a vast number of people would already have got through the net of my hon. Friend's suggestion and will continue to remain outside it because they will not be applying for a licence renewal until they are 70. To meet my hon. Friend's point, we must do something with greater urgency than that suggestion would imply.
Secondly, there is the problem, which has been a running theme throughout the debate, of knowing where to stop with the detail of advice. One could end up by suggesting particular insurance companies that are better than others, and that is clearly not the role that the Government would wish to undertake. On the application form point, the question is how much further one could go than the highway code in saying tht one must he insured. I will consider that point because at the moment we are working out a form of words with Swansea that would be appropriate to carry out what my hon. Friend


has been suggesting in warning people about this problem. When we have the form of words, it might be used for other purposes.
I thank my hon. Friend for giving the House an opportunity to discuss this important subject. Although I have not been able to meet one of his precise suggestions —that we should devote space to matters of insurance and liability in the highway code — I have been encouraged by my hon. Friend to give the matter more publicity. My intention is that the message that we shall put out will emphasise the importance of drivers' decisions on insurance and their implications. As my hon. Friend has said, it is manifestly in the interest of motorists to be sure that they understand the cover that they are buying or have bought. The debate has served a valuable purpose in pointing out that fact.

Police (Agents Provocateurs)

11 am

Mr. J. Enoch-Powell: I wish to use the opportunity that has fallen to my lot to place on record on the Floor of the House—which I consider to be the only proper manner in which to do so — a matter of great public interest and importance, which is of considerable relevance to the rule of law, and to ascertain the public position on the matter that is taken up by the Home Secretary on behalf of the Government. I am grateful for the presence of the Under-Secretary of State for the Home Department.
I can put the matter on the record by rehearsing a number of communications that have passed between myself and the Home Secretary in recent months. The issue goes back to 6 November last year when, in a written question, I asked the Home Secretary
if he will call for a report from the chief constable of the West Midlands as to the circumstances in which on or before October 1985 two detective constables represented themselves as having murdered the late Airey Neave.
The Minister replied :
The right hon. Member's question relates to criminal proceedings now before the courts. It would not be right to comment."—[Official Report, 6 November 1986; Vol. 103, c. 532.]
Therefore, it was not until 21 January that I sought that comment again. I asked whether, the case having been concluded, the Home Secretary would answer my question. I was told :
I understand that, as part of an operation which led to the conviction of two men for conspiracy to murder, two detectives represented themselves as members of a terrorist organisation. I am informed that the Police made an apology in court for any distress caused to the family of the late Mr. Airey Neave." —[Official Report, 21 January 1987; Vol. 108, c. 559.]
That seemed to me to disclose such a strange situation that I wrote to the Home Secretary on 23 January, thanking him for his answer to my written question about the story concocted by police agents provocateurs. I continued :
What I fail to understand and what seems to me to be worthy of investigation is the reason why they chose to claim that particular murder by way of self-advertisement. It may possibly have been because no one has yet been made amenable for that murder : but as you will know the possible political links of it have aroused interest.
The substantive part of the Home Secretary's reply on 10 March was :
You ask why the two police officers chose to claim responsibility for that particular murder while representing themselves as members of a terrorist organisation. I understand from the Chief Constable of Leicestershire that this choice was not the result of a considered decision by either the officers themselves or their superiors directing the investigation. Rather, at a meeting between the detectives and one of the men later convicted of conspiracy to murder Mr. Rajiv Gandhi, one of the officers spontaneously claimed to have been involved in the murder of Airey Neave, as part of his attempt to portray himself as an IRA assassin. That this was a role-acting response, rather than a planned statement, by the officer, explains why he attributed Airey Neave's death to the IRA, when in fact it was the INLA who claim responsibility for it.
Two matters appear to arise out of those exchanges between myself and the Home Secretary. The first is the use of police agents provocateurs and whether, in the Government's view, it is an appropriate procedure that police officers should present themselves to a member of the public as belonging to a terrorist organisation and


offer to undertake a murder on his or her behalf. That seems to overstep the line that divides the function of an agent provocateur from other investigative activities. It seems to me that for a police officer to act in a way that a member of the public might act and thus place himself in the way of detecting criminal actions or intentions is one thing, but for a police officer to offer to carry out a crime and to advertise himself as a specialist in that type of crime oversteps the line between innocent investigation and the function of agent provocateur, which I have always supposed, perhaps innocently, lay outside the scope of the British police.
I understand that the Home Office is not directly responsible, in the full sense, for provincial police forces; but its advice and opinion have a deep influence, and we should be told the view of the Home Office on the use of police officers as agents provocateurs.
The second question follows from the first. If the use of agents provocateurs is regarded as an appropriate resource of police forces— I hope that that will not be the Minister's reply—at what level should responsibility for that activity be taken? The Home Secretary has told me that in this case the superior officers under whose instructions the operation was carried out had not specified the details and maintained no control over the manner in which it was carried out by the detectives.
If the use of agents provocateurs is to be authorised, the authorisation should be given only at a high level of responsibility in police forces, and full control over so alarming an operation should be maintained by those who cover it with their orders and their responsibilities.
There are two questions. The first is the general question of the use of agents provocateurs by the police, which needs to be cleared up by a comprehensive statement. The second question, which falls within the first, is whether, supposing such operations are countenanced, the responsibility for them and for the detailed way in which they are carried out should be visibly lodged at a high level in the police force concerned.
I hope that, as I drew the attention of the Under-Secretary to my correspondence with the Home Secretary, he was able to be adequately briefed on the two questions that I have put to him. There is no point in my detaining the House further. I hope that the Under-Secretary will be able to deal with both points.

Mr. Ivan Lawrence: I have no wish to rain on the parade of the right hon. Member for South Down (Mr. Powell), so I shall be brief.
If the police were not allowed to fulfil a function as agents provocateurs, few of the recent cases of substantial drugs offences and widespread counterfeiting of international currency could have been brought before the courts.
As the law is, there is nothing improper about police being used as agents provocateurs in the English jurisdiction, although there is something improper about their being used as agents provocateurs in the American jurisdiction. It is no defence for an accused person to say that he would not have committed the offence but for the use of an agent provocateur. The only point at which the fact that an agent provocateur was employed can be used in favour of the defendant is in mitigation of the gravity of an offence if he is convicted.
However, in favour of the right hon. Gentleman's argument, I should say that the use of an agent

provocateur causes grave concern to juries, lawyers and, I suspect, to the police themselves. There is something un-British about using that device. In my experience, juries rarely convict on the evidence of agents provocateurs unless that evidence is substantiated by strong corroborative evidence. The right hon. Member for South Down is right to say that such evidence should never be used except with the authority of senior police officers who are capable of making precisely the right assessment as to its need. In my recent experience, that requirement has been fulfilled in the British courts and has resulted in a substantial gain to the public, in as much as dangerous criminals and others who have committed serious crimes have been brought to book by its use.

Sir John Biggs-Davison: I wish only to ask a question, and I hope that my hon. Friend the Under-Secretary of State will include a reply to it when he answers the right hon. Member for South Down (Mr. Powell). As a friend, and as the deputy of Airey Neave when he was the Opposition Front Bench spokesman on Northern Ireland, I wish to ask what progress has been made in apprehending his murderers. Will my hon. Friend , speaking for the Home Office, give me an assurance that the police forces of the United Kingdom will make it a matter of honour to continue with, and not relax, their investigations until those murderers have been brought to justice?

Mr. Peter Bruinvels: I apologise for coming in slightly late. I congratulate the right hon.. Member for South Down (Mr. Powell) on making a most important point. I have been involved in two cases in the past, both of which concerned agents provocateurs, and in which charges might not have been laid if the police had not acted in that capacity.
The first involved one of our own hon. Members some time ago, and had to do with homosexual activity. I believe that if an agent provocateur had not been involved in that incident there would have been no charge, investigation or inquiry. If that person had not been approached by the police in the first place, I am not sure whether any offence would have been committed. That concerns me greatly.
The police have a good record of high detection rates, but to create the circumstances in which an offence could be committed and then to charge one of our own Members seems a strange way to behave.
The second case concerned one of my constituents—a Sikh who was recently involved in a Sikh trial in the Birmingham crown court in connection with the Rajiv Gandhi attempted assassination plot. In that case, which has been right through the courts, a young informer approached a couple of people in the case and suggested—

Mr. Deputy Speaker (Mr. Harold Walker): Order. I understand that the case to which the hon. Gentleman is referring is subject to appeal, and may therefore be subject to the sub judice rule of the House.

Mr. Bruinvels: I am not aware of any appeal—

Mr. J. Enoch Powell: If the hon. Gentleman is referring to the case—I see that the Under-Secretary of State is nodding his assent—it would appear, with great respect,


from the reply that was given to me by the Home Secretary, that that matter is now outside the sub judice rule. I apologise for making that point.

Mr. Deputy Speaker: I do not know whether the advice that has been tendered to me on the latest state of play in the case can be confirmed.

The Parliamentary Under-Secretary of State for the Home Department (Mr. Douglas Hogg): On a point of order, Mr. Deputy Speaker. My information is that the matter is subject to appeal. That is my understanding, and if I am wrong, I apologise.

Mr. Deputy Speaker: Can the Minister advise me whether an appeal has been lodged?

Mr. Hogg: I cannot give the date of the notice of appeal, but I understand that an appeal has been lodged.

Mr. Deputy Speaker: It has been confirmed that an appeal has been lodged, so the case is subject to the sub judice rule of the House.

Mr. Bruinvels: I was not aware of that. What I am trying to say is that, if someone approaches a person and asks him to take part in an activity, he is creating an atmosphere in which an offence can take place at a later date. My concern is that, if that person had not been so approached, no offence would have been committed. I appreciate that all the police want to do is catch as many criminals as they can. I salute the Leicestershire police force—or any other—for its rigour in bringing cases before the courts. I am concerned only that in certain circumstances the police seem to be creating trouble for people in cases such as those that I have described. The police should return to the business of detection, rather than seeking potential villains by becoming villains themselves— albeit temporarily—in the hope that they can bring charges against people in the future.
Of course I acknowledge what was said by my best hon. Friend the hon. and learned Member for Burton (Mr. Lawrence), in view of his experience as a leading Queen's counsel; but I am fearful about the role of the agent provocateur. The police should continue with their normal commitments, such as the detection of crime, and not seek ways of catching potential villains. The law is there to be obeyed. A number of Conservative Back Benchers rebelled over the clause concerning agents provocateurs during the debate on the Police and Criminal Evidence Bill. The police should be allowed to get on with their normal, honourable job, without going into muddy waters.

11 .18 am

The Parliamentary Under-Secretary of State for the Home Department (Mr. Douglas Hogg): I congratulate and thank the right hon. Member for South Down (Mr. Powell) for having raised a matter of considerable importance. I shall try to clarify the distinctions between the obtaining of evidence and the action of an agent provocateur. A number of the speeches that have been made — although not the speech of the right hon. Gentleman — have elided the difference. There is a distinction between the role of agent provocateur and the obtaining of evidence. I shall deal with that matter when I comment on the speech of my hon. Friend the Member for Leicester, East (Mr. Bruinvels).
It might be helpful if I begin by defining the rules that govern police conduct in this area before I turn to the particular case and the questions that were raised by the right hon. Member for South Down. It is important that the House knows what an agent provocateur is. It is perhaps most authoritatively defined by the Royal Commission on police powers in 1928, which stated that an agent provocateur is a person who entices another to commit an express breach of the law which he would not otherwise have committed, and then proceeds or informs against him in respect of such an offence.
The critical element is that of enticement or incitement. Merely to report on the criminal activities of another is not to act as an agent provocateur. I see that the right hon. Member for South Down agrees with me. The essential element is the act of enticement or inducement.
The use of agents provocateurs is unlawful. That was stated most authoritatively by the then Lord Chief Justice in the case of Brannan v. Peek in 1948. Because it is important, it might be helpful to state that authoritative definition of the law :
He said:
It cannot be too strongly emphasised that unless an Act of Parliament provides that for the purpose of detecting offences police officers or others may be sent into premises to commit offences therein—and I do not think any Act does so provide—it is wholly wrong to allow a practice of that sort to take place…If the police authorities have reason to believe that offences are being committed in public houses"—
that was the issue at the time—
it is right that they should cause watch to be kept by detective officers, but it is not right that they should instruct, allow, or permit a detective officer or constable in plain clothes to commit an offence so that they can say that another person in that house committed an offence.
That case involved illegal betting in a public house, which police officers kept under surveillance. They suspected what was going on and one of them went into the premises and laid a bet. The state of the common law is that which was laid down by the Lord Chief Justice in 1948, and it has received a powerful echo and reinforcement by Home Office guidelines, which have always made it clear that behaving as agents provocateurs is not permitted for members of police forces. Indeed, it is not permitted for their informants either. The relevant guidance is to be found in the Home Office circular to the police on crime and kindred matters, a copy of which is to be found in the Library. The relevant paragraph states:
No member of a police force and no public informant should counsel or procure the commission of a crime.
As I have already stressed, that prohibition applies to police officers and to informants who provide police officers with information. The guidance continues:
The informant should always be instructed that he must on no account act as agent provocateur, whether by suggesting to others that they should commit offences or encouraging them to do so, and that if he is found to have done so he will himself be liable to prosecution.
That is about as comprehensive a statement of the legal position as could be given. I suspect that it is a statement of the law that would satisfy the right hon. Member for South Down and be supported by my hon. Friends who are sitting below the gangway.

Mr. Eric S. Heffer: It is the first time that I have heard the definition to which the hon. Gentleman has referred, and I find it fascinating. It would seem that a police office is allowed to join an organisation that might be provocative, be it on the Right or the Left,


and be accepted as a member of it. Apparently that is perfectly all right, but it is not allowed for him to say, for example, "Next week we shall throw some petrol bombs". If the officer did that he would be acting wrongfully. What is his role if he joins an organisation and becomes involved in informing on people who belong to it? Is that allowable under the law?

Mr. Hogg: The hon. Gentleman has raised an important issue and I am not sidetracking when I say that I shall respond to his intervention later. There is a distinction which I shall try to set out in practice.
It is proper for police officers to infiltrate criminal or terrorist organisations. In the ordinary course of that infiltration they must show some enthusiasm for what is going on in the organisation otherwise the infiltration would prove impossible. However, they must not incite or encourage the commission of offences by others. I accept at once that the distinction is sometimes a narrow one and that it is not always easy to adhere to it. On the whole, however, I believe that the police are adhering to it. This is a matter which I should like to return to in the course of my remarks. The hon. Gentleman is right to focus on the practical difficulties that arise in instances where the police have to infiltrate criminal or terrorist organisations.
If the police or their informants are to penetrate organisations, they must get inside them. It would not be possible for police officers to obtain the information that we would wish them to secure if they did not, in the course of making acquaintance with the members of the organisation, show some enthusiasm for the terrorist or criminal conspiracy, or the purpose which its members might have in mind. That is a practical difficulty.
Anyone who acts as an agent provocateur must be alert to the distinction which is reflected in the guidelines and in the judgment to which I have drawn the attention of the House, which I have tried to amplify in my remarks.
To what extent are agents provocateurs used? It is difficult to give a categorical and certain reply to that question, but I can say that since 1969–70 few allegations have been made of the use of agents provocateurs as I determine the term. I have taken the liberty of asking Home Office officials whether they know of such complaints. This is not an authoritative statement, but no one has any recollection of such a complaint. I have made inquiries of the Police Complaints Authority—again, I do not pretend that this is an authoritative answer—and it has no recollection of a complaint being made about the use of an agent provocateur in the sense that I use that term, which is that there must be incitement or encouragement by a police officer or an informant for others to commit a crime. On the whole, the police are adhering strictly to the requirements of the law and the guidance to which I have drawn attention. I cannot be more authoritative than that because there is no material to justify a positive assertion. The approach that I have outlined was accepted in 1969 by the central conference of chief constables and is widely acknowledged and understood.

Mr. Heffer: Were not some complaints made about agents provocateurs during the miners' dispute? I understand that claims were made that certain people who were throwing stones were not miners and were not known to anyone else. These people seemed to disappear into the crowd and then to disappear altogether. Some miners'

officials have said that they were known later to be people connected with the police or associated with them in some way.

Mr. Hogg: The hon. Gentleman refreshes my memory. I accept that those allegations were made during the miners' strike. I am speaking generally — I have not researched this issue—and I believe that I am right in saying that there was no convincing evidence that the persons against whom the complaints were made were police officers. I am dealing now with a rather different situation, which is whether there are complaints about individuals who are certainly police officers in cases that can be identified. The hon. Gentleman is referring to accusations which probably can never be pinned on persons who can be identified conclusively as police officers. However, he has refreshed my memory of the complaints which were made during the miners' strike and I am grateful to him for doing that.
In the case referred to the right hon. Member for South Down and touched on by my hon. Friend the Member for Leicester, East the police force concerned was the Leicestershire constabulary. The instructions that are contained in the Home Office guidelines are reflected in the general orders of that constabulary, as they are in the majority of forces of which I am aware. The case arose from the events which surrounded the visit of the Indian Prime Minister in October 1985. I think that all hon. Members will be aware that the events led to the trial of three Sikhs at Birmingham Crown court. Two of the defendants have been convicted and, as I have indicated, I understand that they have appealed to the Court of Appeal, which means that I must be rather guarded in what I say. I hope that the House will forgive me for taking that approach.
A number of complaints arose, some of which were fully investigated at the time by the trial judge and a number of which have been touched on by right hon. and hon. Members. It has been suggested that the trial of the three sikhs was politically inspired. My information, I must admit, is derived primarily from the chief constable of Leicestershire who was the officer ultimately responsible for the operations. I am assured that there is no truth in the suggestion that this trial or the inquiries that preceded it were in any way politically inspired.
I shall deal with the point made by my hon. Friend the Member for Leicester, East. The information which came to the police officers concerning what the Sikhs had in mind came via an informant who was approached by the gentlemen concerned. Once the information had been received by the police, they had to put a full inquiry in hand. The fact that it might in some way have been stimulated by the police officers was given considerable consideration by the trial judge, Mr. Justice McCullough, who commented that the information received by the police was of a kind that clearly justified and, indeed, required full investigation. If my hon. Friend the Member for Leicester, East is trying to suggest that the police were in some way creating an offence, I must say to him as positively and emphatically as I can that there is no truth whatsoever in such an allegation. The police were responding to information. They then put in police officers who then heard evidence. But there is no truth in the suggestion that they were creating an offence that would otherwise not have been created.

Mr. Peter Bruinvels: I was trying to make the point that the Leicestershire constabulary used a petty convicted criminal as a sort of informant. He was the person who was put in at the beginning to meet the Sikhs and to record comments such as, "How would you like to dispose of Mr. Gandhi?" That apparently is how it was done. It is all on file. Those people met in a pub in my constituency. From that point, as my hon. Friend the Minister correctly said, the police were then put in. A full meeting took place at the Post House hotel in Leicestershire. My concern is with what happened then. I am saying that, if those police had not become involved at that point, I suspect that no offences would have occurred.

Mr. Hogg: I entirely disagree with my hon. Friend. A serious conspiracy, which could have had tragic results, was going on. Because the police intervened when they did, no tragedy ensued, and those defendants have been convicted and sent to prison. The idea that the police were in some way manufacturing an offence which would not otherwise have occurred is an illusion. It is wrong. It is a mistake. It is an error. I am trying to persuade my hon. Friend that that is the case. He can intervene as often as he likes, but I must say—

Mr. Deputy Speaker: Order. The Minister will not act as an agent provocateur. The hon. Member for Leicester, East (Mr. Bruinvels) may not intervene as often as he wishes.

Mr. Hogg: I am trying to express emphatically that I do not accept my hon. Friend's suggestion, and I think that I have done that. I would perhaps strain the patience of the House if I continued along that line.
The right hon. Member for South Down asked who controls the operation of the agents provocateurs.

Mr. J. Enoch Powell: Before the Minister comes to that, I should like to put one point to him. If one individual says to another, "I am a very talented professional murderer. I have carried out a number of successful murders" is that not prima facie an enticement to the other person to employ him on that job? What is the meaning, otherwise, of such a conversation?

Mr. Hogg: The right hon. Gentleman is focusing on the real problem that arises. In trying to identify whether a person is an agent provocateur, the question is whether that person is inciting or inducing the commission of a crime. One must judge each case on its facts. For example, if I represented myself as a member of the IRA and sought out custom to kill, clearly I would be acting as an agent provocateur. On the other hand, if I were aware that some people wanted to kill and were putting in hand a conspiracy to kill and I went to them and represented my skills as a killer, there would be no inducement or incitement. I am not trying to dodge the issue or to be over-dogmatic. But there is a very narrow line. We must judge each case on its facts. We must look at the facts of each case bearing in mind the broad policy distinction.

Mr. Lawrence: If I may say so with the greatest respect, there is a danger of being confused about the law concerning the use of agents provocateurs. My hon. Friend began by saying that the concept of agent provocateur was contrary to the law. He cited Lord Chief Justice Goddard in Brannan v. Peek, a case in 1948. But, as I understand the law, that is not so. A number of judgments disapprove of agents provocateurs, but if the

activity of an agent provocateur were contrary to the law, it would be a defence to say, "I would not have committed this offence but for being induced to do so by an agent provocateur", which it is not. Furthermore, it might be within the discretion of the judge to exclude such evidence, which he is unable to do, according to the law. Is this not the position? Agents provocateurs are not contrary to the law.

Mr. Deputy Speaker: Order. Briefly.

Mr. Lawrence: Although it is an activity that is disapproved of, it is perfectly lawful for an agent provocateur to act in a way that induces someone to commit a crime that he would not otherwise have committed and, in due course, that person may be properly convicted if that was evidence given against him. The only way in which it may help the defence is, after conviction and to mitigate the extent of the crime, to say, "I was induced to do that by the activity of an agent provocateur". But is it not sometimes difficult for that defence in mitigation to be effectively advanced? A professional criminal must often be taken to know that he might be tricked into—

Mr. Deputy Speaker: Order. The hon. and learned Member knows that he can speak only once on the motion before the House.

Mr. Hogg: I do not agree with my hon. and learned Friend. Much depends on the definition we give to the expression "agent provocateur". I agree that, if we over-refine it, we get ourselves into difficulty. But I remind my hon. and learned Friend of the Home Office guidance which points to the true position. It states :
The informant should always be instructed that he must on no account act as agent provocateur, whether by suggesting to others that they should commit offences or encouraging them to do so, and that if he is found to have done so he will himself be liable to prosecution.
A necessary element in being an agent provocateur is that the person should himself commit a substantive offence which is part of the conspiracy. If one accepts that definition of the agent provocateur, which is the one I am putting to the House, the activity is unlawful. However, if one accepts a wider definition of the meaning of the phrase "agent provocateur" then one may come to a different conclusion. I am inviting the House to take the narrow definition that I have placed before it. It is for that reason that I cannot agree with the proposition put to me by my hon. and learned Friend the Member for Burton (Mr. Lawrence).
The right hon. Member for South Down raised the particular issue of control, but he premised that by the assumption that we were using agents provocateurs as part of police procedure. I have explained to him, and I hope that I have satisfied him, that that is not part of police practice. Therefore, the second part of his question does not arise in that we are not using agents provocateurs nor did we use them in the case to which he referred. Therefore, the question of control does not arise.
I shall turn to a matter of great distress to a number of people, particularly Lady Airey of Abingdon and that is what was said by one of the officers, Constable Tom B —that is how he was described in the trial—to the effect that he had been part of the murder gang that killed the former hon. Member, Airey Neave. The police, the chief constable and everybody involved are deeply sorry for the


distress that may have been caused to Lady Airey of Abingdon. What was said was in no sense preplanned. It was said by an officer at the time in order to try to cloak himself with credibility in the context of what he was trying to discover. It was not a planned statement and it was not in any way part of the operation. It was a statement that he made on the spur of the moment and he very much regrets the distress that he caused. However, I hope that the House will not be too critical of the officer, bearing in mind his dangerous and exposed position. Perhaps it is right that I should mention to the House that the learned Judge Mr. Justice McCullough at the end of the trial went on to say :
I wish to commend Dectective Constable Tom B and Detective Constable Ian S, both of whom did an extremely good and difficult job and they deserve and get the commendation of the court.
I feel that that is a point that the House would like to take into account when considering what the officers said at the time.
My hon. Friend the Member for Epping Forest (Sir J. Biggs-Davison) raised an important point regarding the inquiries into the murder of our former colleague, Airey Neave. The facts are known to the House. On 30 March 1979 a small explosive device attached to the car detonated and he was killed. The Irish National Liberation Army claimed responsibility for the murder and its claim has been accepted as valid. That claim was reiterated in a television interview in July 1979 by a masked person who was claiming to speak on behalf of the INLA. I very much regret to say that nobody has been charged in connection with the murder and it would be misleading for me to say that I have any information to suggest that a charge is likely to be made in the immediate or near future. However, like my hon. Friend the Member for Epping Forest, I very much hope that the police will devote all their efforts to arresting those people. I would very much like to see them before a British court and I hope that one day that happens.
Other questions have been raised. However, all I can do is reiterate to the right hon. Member for South Down that it is not part of police practice to use agents provocateurs. I do not believe that it happened in this case. What was done was the gathering of information and I think, taking a broad view of what happened, that it was a good thing that the police did receive the information that they did and, as a result, it may well be that a serious crime was averted.

Rate Support Grant (Bedfordshire)

Mr. John Carlisle: I am delighted to take this opportunity to bring before the House the situation that is now facing my constituents and other residents and businesses in Bedfordshire following the steep rate increase that has been levied upon us in the past few days. I should say at the outset how delighted I am to see my hon. Friend the Member for Bedfordshire, South-West (Mr. Madel) in the Chamber I hope that he may catch your eye a little later, M r. Deputy Speaker. We are here with the full support of our hon. Friends the Members for Luton, South (Mr. Bright) and Bedfordshire, North (Sir T. Skeet) and our hon. and learned Friend the Member for Mid-Bedfordshire (Mr. Lyell). I see that my hon. and learned Friend the Parliamentary Under-Secretary of State for Health and Social Security is in the Chamber. My other two hon. Friends have pressing constituency engagements.
Normally a constituency Member will rise with some pride to represent his constituents' interests and that of his county. I was born in Bedfordshire. I was educated there and spent the majority of my working life there. I have lived in the county all my life. However, it is with a sense of shame that I rise today because of what has happened in my county over the past few years and particularly over the past few months.
We are now represented by the Labour and alliance parties, by men and women who are not fit for office They have shown a total irresponsibility in the way in which they have treated the county's affairs, they have abused the privileged system in which they find themselves and have acted with no thought for others. Indeed, in Bedfordshire with the way in which the political wind is blowing in the Labour and alliance parties, we may well find that we might begin—in fact we are already beginning — to suffer the extraordinary systems and policies that have been followed by what is popularly known as the loony Left. I think that my hon. Friends will agree that it may not be too long before we see the red flag flying over county hall in Bedford. For a county with a proud record of achievement and of looking after its residents and businesses, that is a disgrace. Therefore, we thought it fit to bring the matter before the. House this morning.
We have suffered the highest rate increase of any shire county in the country—21·3 per cent. For the domestic ratepayer that means an additional 23·4 per cent. That comes on top of a rate increase last year of 18·4 per cent. In other words, in real terms, including inflation, my constituents are facing a rate increase of nearly 50 per cent. over two years. That is a record of which we are not proud and one that the House should look at in relation to other rate increases that have taken place in surrounding counties.
During the various Budget deliberations that took place, my own group on the council proposed an increase of 10·7 per cent. That is rather higher than many of us would like to see but it would have been a standstill budget that retained services and would have meant that the people of Bedfordshire would not have had quite such a levy to bear. The Labour group proposed 23·8 per cent. and the alliance group 23 per cent. The two groups came together, I believe in a private house not far from where I live, and cobbled together an agreement that has meant


this massive swingeing increase. It was, of course, passed by those two groups in the face of the fiercest opposition from the Conservative group.
At this point I should like to pay tribute to Councillor Philip Hendry, leader of the Conservative group on the Bedfordshire county council, who has done a splendid job over the past few years trying to keep our affairs in order.
After the budget had been agreed there was a split among the Liberal members, which may be enlarged upon by my hon. Friend the Member for Bedfordshire, South-West. However, the alliance leader, Mrs. Janice Lennon, who I believe is a prospective parliamentary candidate for Bedfordshire, North, said,
I support this budget totally.
Therefore this budget, which to the outside observer would be considered a Labour budget, has full alliance support and never let it be said otherwise.
The record of spending in Bedfordshire is not good. That record goes back to pre-1977 days when the Labour council was in office spending money like water and using resources that it did not have. That council left as a legacy to the incoming Conservative group in 1977 a debt charge that, in effect, made Bedfordshire, at that time, the highest spending county. Between 1977 and 1986 the then Conservative-controlled council tried desperately, in the face of fierce opposition from the other parties, to rein Bedfordshire's spending. The Conservative group pulled Bedfordshire back from being first in the league of high spenders to being about 10th or 11th in the league in 1986.
Recent Audit Commission reports for 1984–85 and 1985–86 confirm that, in seven services out of eight, the county council of Bedfordshire was spending more than the others of the family of five —my hon. Friend the Minister will know what I mean by that. On education, social services, police, fire, libraries and highways and other services Bedfordshire was overspending against the other counties. It was only in the matter of refuse disposal, which used the county's resources, that it was at any advantage.
In 1985–86 the council's spending on education was 15 per cent. more than the family average — that is the latest figure available from the Audit Commission. The county was spending 14 per cent. more than the family average on social services. Overall there was an overspend of 11 per cent. If the children of Bedfordshire were receiving a better education than the children of other counties perhaps my complaint would not be so loud. If our schools were in better order than other counties perhaps I would have some support for that spending spree. If the old people and those in residential care were better off than those in other counties and were receiving better care perhaps one might be able to say that such expenditure was justified. However, when that money is being spent and the services are still not up to the family average I believe that we have cause to complain.
Within the past few months we have learnt, as a result of a survey carried out by the university of Sheffield on O- level results, that Bedfordshire comes 87th out of the 91 local education authorities. The county council has overspent every single year, but it has not given the ratepayers value for money.
Indeed, since 1985 when the Conservatives lost control at the election, the county council has seen fit to spend money on what many would describe as spurious

objectives. For example, Bedfordshire has become a nuclear-free zone. Some £50,000 was spent to achieve that end. I should like to say in passing that I am delighted to note that the Conservative group of the council has put down a motion for the next council meeting congratulating my right hon. Friend the Prime Minister on her talks in Moscow. I hope that those talks will make the people of Bedfordshire sleep more easily in their beds and I hope that those talks will do away with the necessity of the nonsense of the nuclear-free zone in Bedfordshire.
The council has also spent money on anti-South African activities. It has spent money to support the anti-apartheid movement and on distributing literature to local district and parish councils. It has spent money to try to encourage African National Congress speakers to come to Bedfordshire. It has spent money encouraging the Bedfordshire youth orchestra, of whom we are very proud, to play, as described by the council. "anti-racist tunes". That represents money and time that should have been spent in other ways. If the councillors were spending the money wisely perhaps the luxury of worrying about people some 6,000 miles away would be justified. However, that money has not been spent wisely. Moreover, I have not been able to discover, at any time, exactly how much money has been spent.
Even the education department at county hall is now dictating what type of films should be shown in schools. I am indebted to my friend councillor Philip Hendry who informed me that, only last week, two films were to be shown to the children at a local school in the Bedford constituency. One was a pro-CND film and the other was a NATO film. The former film, the CND film, was the only film that was allowed to be shown by the school.
In the past few weeks the council has produced various forms of literature that are published under the names of the three leaders. However, as a result of the majority verdict, the Labour and alliance leaders outvote the Conservative leader every time. However, the literature is still produced as if it comes from the county council. Needless to say, the literature is full of untruths. I go so far as to say that much of it is downright lies. Nowhere does it give credence to the policy that the council has followed. Indeed, most of it is anti-Government and misleading to the electorate of Bedfordshire.
The great cry all the time from the Labour and alliance groups is on the basis that the blame for the rate support grant cuts that we have experienced lies entirely with the Government. In none of the literature is the truth explained.
The truth is simply this. I am indebted to my hon. Friend the Minister for the reply that he gave to my hon. Friend the Member for Bedfordshire, South-West on 1 April, when he said :
Bedfordshire county council's grant entitlement for 1987–88 amounts to £3·72 million at the level of expenditure we estimate it has budgeted for. This is £8·2 million less than it would have received if it spent at the settlement spending assumption — that is a 5·25 per cent. increase on current expenditure—and £9·9 million less than if it had increased expenditure in line with inflation. These entitlements and Bedfordshire's budget include the estimated effects of the teachers' pay deal."—[Official Report, 1 April, 1987: Vol. 113, c. 549.]
In other words, the overspend that those two groups have made their policy in Bedfordshire has meant that for every pound that they overspend, a further 73p has to be found from the ratepayers. How they have the gall to


blame the Government for such an overspend when they have deliberately gone out of their way to increase expenditure by some 12 per cent., one begins to wonder.
The most tragic thing about the rate increase is its effect upon the people of Bedfordshire. I know that my hon. Friends will support me in that, from the correspondence and literature that they have received from constituents. For example, pensioners, who at all times are on a tight budget, but many of whom have prudently saved and live in their own homes, are now faced with a massive increase of 23 per cent. Those on low incomes who have saved hard to buy their own homes, particularly first-time buyers, now find a tremendous burden put upon them, over which they have no control.
Perhaps most telling of all is the fact that businesses in Bedfordshire are bound to suffer. I am indebted to Luton chamber of commerce, which covers the whole county, for giving me various figures for the businesses that will be affected by the rate increases. The chairman of the rates committee told me that at the committee's most recent meeting the members sat in horrified silence to hear the size of the rise that they faced, whith which they and their businesses would have to cope.
A consultation process was put into being by the Government in 1983, so that certain sections of the community could have a say or express an opinion on what the rates should be. That process has broken down completely in Bedfordshire. There was short notice of consultation. People were informed on the Friday of a meeting the following Tuesday. At that time, the proposed rate increase was about 16·7 per cent. The chamber of commerce is bitter that the protests that it made went unheard by the Labour and Liberal groups. Indeed, those groups do not seem to have any idea of the effect that their rate increase will have on commerce in the county.
New firms are bound to be discouraged. In particular, we in the south of the county are trying to encourage new businesses into an area where we have an excellent railway and road system, an international airport, offices and premises at cheap rents, and a pleasant environment. Those businesses will be discouraged because of the proposed rate increase.
Ironically, on local radio this morning, I heard the prospective Labour candidate for Luton, South say that he was concerned that the rate of unemployment in the Luton area was now above the national level, so there must be urgent talks about what to do about that. That was said by someone with a great responsibility for his party and those whom he hopes to represent in the area. It is nonsense for him and others to talk about loss of jobs at the same time as handing out such a rate increase to local businesses. Vauxhall Motors, the largest employer in my constituency faced a rate increase of more than £2 million. I can tell the work force that if the wage increase that they are looking forward to this year is cut, they must look to the Labour and alliance councillors to discover where some of the money that might have gone into their pockets has gone.
Only last week I had a meeting with small shopkeepers in one part of Luton. Three or four of them said quite emphatically that this would probably be the last 12 months that they will be in business because they cannot cope with such a rate increase. The only way in which they can hope to save any money is by laying people off or sacking them. In other words, there will be a direct loss of jobs as a result of what has happened.
I have no doubt that the villains of the piece of this particular sorry tale are those members of the alliance party within the county. We expect Labour councils to act irresponsibly, to spend money that they do not have arid not to consider the welfare or well-being of their constituents. We perhaps do not expect that from the. alliance. Bedfordshire has shown without any doubt that the alliance councillors are as much villains of the piece as their Socialist counterparts. They went along with the budget and are completely oblivious of the misery and devastation that the budget will cause to my constituents and others throughout the county. The blame must lie with those alliance councillors. The only hope is that when the Government are returned after a general election —probably within the next few weeks—we might through the new community charge and rating system be able to bring some relief to those particularly hard-pressed ratepayers. Those ratepayers must remember where the blame lies in this sorry tale.

Mr. David Madel: I am grateful to my hon. Friend the Member for Luton, North (Mr. Carlisle) for allowing me to intervene for a few minutes in the debate. I congratulate him on winning a place in the ballot. We are both delighted that my hon. and learned Friend the Member for Mid-Bedfordshire (Mr. Lyell) is present to support us in this very important debate about Bedfordshire's rates.
It is important to consider a little of the history to understand how the 1987–88 settlement was decided. The history of the past six or seven months is so often distorted by those people who have supported the huge rate increase.
In October 1986, the Government put forward proposals for the 1987–88 rate support grant settlement: and invited representations. The October proposals —and I stress "proposals" —caused immense concern in Bedfordshire. While others were complaining and grizzling about the position, the Conservatives in Bedfordshire were acting. By that I mean that the Conservative group leader Philip Hendry and some of my hon. Friends and myself went to see my hon. Friend the Minister who will be replying to this debate to discuss the October proposals. As a result of those discussions, I received a letter from my hon. Friend the Minister for Local Government dated 3 December 1986 in which my hon. Friend states:
After full consideration…we have decided to revise the earlier proposals.
In other words, he had decided to revise the October proposals. My hon. Friend went on to say in his letter :
Bedfordshire County Council was one of those authorities who, under our original proposals, stood to lose a substantial amount of grant. Although…the new proposals for a tighter safety net would
result in Bedfordshire having—
an improvement of £3·1 million.
I stress that my hon. Friend said that there would be "art improvement of £3.1 million" on the October proposals.
Those members of the county council who study those matters knew about the letter and the improvement. Some reacted predictably by simply saying that it would make no difference and they started up their new proposals for more big spending. Some, in my view, acted with what: would call hesitant indignation. They were not sure how to play this one. They did not know how it would affect what rate they would levy. They did not expect an


improvement. Having spent from October to December, complaining and grizzling about the position, but not doing anything, when the Conservatives did something —to which I have already referred—they did not know how to play it.
The Conservatives then got on with preparing a budget for the forthcoming year, which provided for a rate increase of 10·7 per cent. They arrived at their budget using precisely the same process as they used in 1986. They took the level of inflation and the percentage of loss of grant, and arrived at a percentage rate increase as a result. They took a 6 per cent. loss of grant and a 4 per cent. to 5 per cent. rate of inflation. When they considered the large percentage of the education budget covered by teachers' salaries and the fact that the education budget represents between 65 per cent. and 70 per cent. of Bedfordshire county council's total budget, the Conservatives at county hall thought that the proposed rate increase of 10·7 per cent. was as reasonable as possible.
The question then follows : why are we having this argument about the loss of rate support grant? Instead of concentrating on that budget and what it would have meant for Bedfordshire, the alliance and Labour members constantly went on about the loss of grant. That point was adequately covered by my hon. Friend the Minister in answer to a question from me on 1 April. He said :
It is Bedfordshire county council's decision to increase expenditure by 12·0 per cent. including additional expenditure arising from the teachers' pay deal, which has resulted in the reduced grant entitlement.
Earlier in his answer, my hon. Friend said :
Bedfordshire county council's grant entitlement for 1987–88 amounts to £37·2 million…This is £8·2 million less than it would have received if it spent at the settlement spending assumption."—[Official Report, 1 April 1987, Vol. 113, c. 549.]
County councillors know how the system works. They know that if they spend above a certain level, grant will be lost. They know the consequences of their actions, but they will not face up to them. The ratepayers will have to face the consequences of the actions of the Bedfordshire county councillors who voted for this huge rate increase. They are forgetting the people whom they represent.
My hon Friend the Member for Luton, North mentioned the effect on businesses. I can quote the rate bill for Delco Products—an extremely important firm in Dunstable and one of the largest employers in the county. In 1986–87, Delco's rate bill was £464,779 — or nearly half a million pounds. For 1987–88, it will have to pay another 21 per cent., which is bad news for such a major firm.
But there is more to come. In the Beds and Bucks Observer of 7 April, Mr. J. M. Hudson of the National Federation of Self-Employed and Small Business wrote to the editor saying this :
I would advise you that the first casualty of this 23·4 per cent. increase has been reported to us this week. A small engineering workshop is closing at the end of the March as it is unable to finance a further rate increase of just over £500 a year. The owner, having taken a salary cut to cope with last year's increase, does not feel inclined to accept another of £10 per week this year. No doubt those Labour and Liberal councillors who forced through this totally unacceptable and unwarranted increase will be delighted that their policy is already taking effect and has put three more people on the unemployment register.

I say to the county councillors who voted for the rate increase, "Read that letter carefully and ask yourselves about your attitude to employment in Bedfordshire in 1986. Did you express immense concern as we went through all those difficulties with General Motors? Do you mean it when you say that you want more jobs in Bedfordshire, and that you are 'very worried' about the position? If you do mean it, you should pay attention to Mr. Hudson's letter, and see where the policies for which you voted are leading Bedfordshire."
Before deciding the rate increase for 1987–88, the county councillors should have considered a number of factors. First, they should have considered the employment level in the county, especially after all the difficulties in 1986 caused by the loss of jobs in General Motors. Members of Parliament constantly receive propaganda notices from county hall saying that such and such a committee is very worried about the increase in unemployment. County councillors rush around Bedfordshire and down to London for meetings, hardly pausing for breath as they tell us how worried they are. But when they had the chance to do something, what did they do? That is what this debate is about : they made a huge increase in the rates.
The county councillors should also have considered owner-occupiers of modest means. Many families in Bedfordshire can just manage to afford a house and to pay the mortgage, but the price tag to a house incorporates not only the mortgage and the capital cost, but the rates. The county councillors should have taken that into account.
Thirdly, the county councillors should have considered the need to attract skilled people to the county. I include teachers in that definition, as teaching is a skilled profession. That is another grumble that we hear constantly : county councillors are very worried because it is difficult to attract teachers to such and such a school, as teachers living in other parts of the country cannot afford houses in Bedfordshire. They write letters to newspapers and talk about their concern on the radio, but when it comes to doing something to help, they do something that does not help at all.
Finally, the county councillors should have considered, and should consider again and again, that houses in Bedfordshire are not cheap. Why make them still more expensive with a large increase in the rates?
But the county councillors did none of those things. Instead, they drew up a shopping list of spending, made a clumsy attempt to hide the price and eventually came out with the rate increase. Before fixing the rate, they should have asked a central, guiding question : what could they reasonably ask domestic and business ratepayers to pay, bearing in mind the general economic position in Bedfordshire? People's ability to pay should be uppermost in county councillors' minds.
I used the words "general economic position"; that means employment, and the need to bring more businesses into the county. But that issue was not considered, or, if it was, it was not put at the top of the list. People in Bedfordshire are being asked to pay an unreasonable amount. The inescapable truth is that Bedfordshire county council is living beyond its means—or, rather, beyond the domestic and commercial means of its ratepayers, for it is they who are carrying the can.
It need not have happened. There was an improvement in December, and the rate increase could have been much more reasonable. However, the planned Conservative budget for a more reasonable increase was voted down.
My hon. Friends and I are constantly bombarded by county councillors with suggestions of what we should do to help Bedfordshire. We know that there is plenty to be done, and we are trying to do it. But the supreme thing that we are trying to do—it is why we are here today—is to ensure that the county council lives within its means, and that the cost of living for the people of Bedfordshire is reasonable. We think that what has been proposed is unreasonable and unacceptable. It will do no good for domestic or business ratepayers, and the county councillors who voted for it will have to face the consequences one day.

The Parliamentary Under-Secretary of State for the Environment (Mr. Christopher Chope): I congratulate my hon. Friend the Member for Luton, North (Mr. Carlisle) on securing this debate and on giving me the opportunity to explain the rate support grant settlement for Bedfordshire county council for 1987–88. Also I congratulate him and my hon. Friend the Member for Bedfordshire, South-West (Mr. Madel) on telling the House so vividly of the horror story for the Bedfordshire ratepayer at present of a socialist council—comprising those who call themselves Socialists, the Labour party, and members of the alliance parties who deny that they are Socialists—that is implementing Socialist policies with a vengeance.
I remind the House of what my right hon. Friend the Secretary of State for the Environment said about the settlement in the debate on the rate support grant settlement for 1987–88. He said :
we have provided a generous settlement for local authorities. The aggregate Exchequer grant of £12,842 million is an increase of over £1 billion — 9 per cent. more than in the settlement for 1986–87. Provision for local authority current expenditure at £25,251 million is 13 per cent. more than last year. Those figures exclude the additional provision of £460 million, and the grant of £183 million which we have said will be made available for the teachers' pay settlement for 1987–88." — [Official Report, 25 March 1987; Vol. 113 c.440.]
The settlement allows for non-rate-capped authorities to increase their current expenditure by 5·25 per cent. When teachers' pay is taken into account, that will allow education authorities to increase their expenditure by 7·75 per cent. Those increases are more than the rate of inflation that we expect next year, which my right hon. Friend the Chancellor of the Exchequer forecast in the Financial Statement and Budget report to be 4·5 per cent. on the GDP deflator. Therefore, there is no reason why prudent and responsible authorities could not have chosen to set reasonable budgets and rates.
As we have heard, Bedfordshire county council has set a precept for the current year of 232·20p in the pound, a 21·3 per cent. increase on its precept for 1986–87. This is the largest increase of any shire county and follows the 18·8 per cent. increase in its precept for 1986–87. Bedfordshire now has the fifth highest precept of all shire counties.
It seems that the people who are now running the county council are determined to undo the fine work that was done by the Conservatives when they were running the

county council. I take this opportunity to pay tribute to the fine work of Philip Hendry and the members of the Conservative group not only when they were running the council but also now, when they are trying to expose the absurdities that are being perpetrated by those who are running Bedfordshire county council.
Between 1978–79 and 1985–86, the level of expenditure in Bedfordshire was kept constant, in real terms. That was a real achievement by the Conservatives, because most other councils were increasing their expenditure to some extent. However, they managed to use the fat that they had inherited to ensure that good services were provided at reasonable cost. However, within the space of two years since the Conservatives lost overall control of the council, expenditure has increased by over 20 per cent., in real terms.
The increase this year of 12 per cent. is nearly three times the expected level of inflation. As has already been pointed out, that has resulted in a reduction in its grant entitlement and to a 21 per cent. increase in the precept. If Bedfordshire had budgeted to increase its expenditure in line with inflation and to finance the teachers' pay deal, it would have received £47·3 million in grant—slightly more than for this year. In those circumstances, it would have needed to increase its precept by only 5·3 per cent. However, the county has decided to increase its expenditure by 9·5 per cent. to £230·3 million, excluding the costs of the proposed teachers' pay deal.
We estimate that this year Bedfordshire's expenditure, including an allowance for the teachers' pay deal, will be about £235 million. At this level of expenditure, it will receive a block grant of about £37·4 million. The county's decision to increase expenditure above the level of inflation has thus cost it £9·9 million in reduced grant. This grant loss, together with its £25·2 million of increased expenditure, has led to the 21·3 per cent. increase in its precept.
It is significant that while my hon. Friends, together with the leader of the Conservative group, lobbied hard to try to persuade my right hon. Friend the Secretary of State to adjust his original proposals for the October settlement — successfully and forcefully acting as always in the interests of their ratepayers— it seems that behind their backs the alliance and Labour parties which were running the council had planned massive increases in expenditure, totally irrespective of the needs and concerns of the people of Bedfordshire. Those Members of Parliament might not have bothered to try to lobby, because I suspect that if we had not listened to their representations the increase might not have been greater than the 21·3 per cent. that was imposed because the Labour and alliance parties might have thought that a higher increase would have been too much, even for them.
While many authorities have sought to restrain their expenditure and have managed to keep their precept increase to low single figures, Bedfordshire and a few other authorities have pursued profligate spending policies at the expense of their ratepayers. It may help if I put that in a national context, because my hon. Friend the Member for Luton, North has not only served his constituents well in bringing this matter before the House today but has served the nation well, too. It is a reminder of what happens when the local electorate have short memories and forget that the Liberals and the SDP, when combining with the Labour party in local government, pursue high-spending policies.
That is reflected in other precept increases in the shire counties. The average shire county precept increase is 7·9 per cent. In Conservative-controlled counties, precepts will increase, on average, by below that amount, by 6·5 per cent. In Labour-controlled counties, they will increase by an average of 8·7 per cent. In Lib-Lab pact counties, they will rise by 9·1 per cent., and in the one Liberal-controlled county, the Isle of Wight, that figure is 10 per cent. Thus, as my right hon. Friend the Secretary of State said on 26 March, there is a premium for living in a Socialist county and an additional premium for the price of alliance support. Bedfordshire illustrated well the effect of the high —spending policies of authorities that are controlled by a labour and Liberal pact. As I have already stated, its precept increase for this year is the highest of any shire county.
We have already heard of some of the priorities of the new councillors of the alliance and Labour parties. It may be quite a surprise to many people to know that, in Bedfordshire, Liberal and SDP councillors support spending on nuclear-free zones. How absurd such expenditure is, especially when the consequences are so grave for local people.
Examples of other areas in which substantial savings could be made are set out in the Audit Commission's profiles. I invite my hon. Friends to look at the most recent figures for 1986–87, which have just been published. They show, for example, that in primary education, non-teaching costs per pupil in Bedfordshire are £251, which compares with a family average of £230, suggesting potential savings of about £800,000. In secondary education, the non-teaching costs per pupil in Bedfordshire are £408, compared with the family average of £384 which suggests, prima facie, potential savings of £1·1 million. Similarly, there is higher expenditure on the costs per meal of school meals and of the costs per head to the social services of children in care. The cost per head for children in care in Bedfordshire is £6·79, whereas average counties with similar circumstances charge only £3·89. Therefore, there is a potential saving of about £1·5 million.

Mr. John Carlisle: My hon. Friend may also care to note that despite the 16,000 spare school places in Bedfordshire, the Lib-Lab-controlled council now proposes to increase the number of teaching posts. That is yet another example showing that the council has no concern for the education service and is trying to buy votes by increasing the number of posts without taking account of the spare places that exist within the system.

Mr. Chope: That is further evidence of the horror story about the present council and of gross mismanagement. That is not the sort of behaviour that anyone in the private sector would contemplate if there was pressure on the budget. Individual householders living in the county must make real cuts in expenditure to accommodate the increased rates burden. While that sort of attitude prevails, I understand the despair of my hon. Friend for his constituents.
In 1985–86 Bedfordshire spent 0·1 per cent. above its grant-related expenditure; in 1986–87 the figure increased to 3·9 per cent.; and for 1987–88 the overspend seems likely to increase still further to about 9 per cent. above GRE. An objective assessment for grant purposes of the various needs of the counties shows how Bedfordshire's needs are nothing like sufficient to warrant the high and rocketing expenditure of the present council.
My hon. Friends rightly drew attention to the implications of that for businesses. However, there is welcome news on the horizon. After the general election, in the first Session of the next Parliament, we shall introduce the community charge and the national non-domestic rate Bills. It will then no longer be possible for local authorities to fleece business ratepayers who do not have a vote or to impose substantial increases on them above the rate of inflation. We are pledged to limit national non-domestic rate increases each year to the rate of inflation and that will be included in the primary legislation. That means that in Bedfordshire there will be a reduction in the national non-domestic rate, if the substantial increase this year is taken into account. There will be the certainty that in future small businesses will not find themselves suddenly landed with a 20 per cent. increase in their overhead in one area. I sympathise enormously with the plight of all those people in Bedfordshire who are losing their jobs as a direct result of the council's actions.
I understand the problem at AC Delco. Indeed, I have a Delco plant in Southampton which, similarly, has been suffering from the effects of a Labour council and a hung county council, as rates have increased much faster than they should have done.
We recognise the problem of resource equalisation, which is a reason why my hon. Friends made representations to me. One effect of introducing the community charge will be to remove the resource equalisation problems. The community charge for a two-person household in Bedfordshire will be about equivalent to the present rate bill for a two-person household. That means that if a local authority wishes to increase its expenditure significantly above the rate of inflation the burden will fall directly on all adults in the area. We hope that that will lead to increased accountability and will concentrate the minds of electors to a greater extent than perhaps was the case two years ago.
As my hon. Friends said, although in 1977, before the Conservatives won control, the council had a record of high spending and extravagance of which people were well aware, seven or eight years later they had forgotten about it. Now they find that they must repent at leisure because it will be two years before they can oust the present council.
To sum up, Bedfordshire county council had a good settlement this year. If it had budgeted to increase its expenditure in line with inflation and finance the additional cost of the proposed teachers' pay deal, the precept increase could have been about 5 per cent., which is below the average county increase. Instead, the ratepayers of Bedfordshire are paying the highest increase of all the counties, and are paying for the alliance and Labour council's high-spending policies.

Greater London Council (Abolition)

Mr. Tony Banks: I see that the Linder-Secretary is staying in his place to answer this debate. He is certainly earning his Easter egg this year. I am sure that he will not be congratulating me on the subject that I have raised as he congratulated his hon. Friends on the subject that they raised. However, I am grateful for the opportunity to raise the subject of the cost of the abolition of the GLC in financial and service terms.
I remind the House that the abolition of the GLC was a prime example of political vandalism by the Government, and arose out of the Prime Minister's paranoia. The abolition of the GLC owed nothing to political rationality, local government efficiency or the needs of Londoners. From the outset, it was about the Prime Minister's malice and her particular detestation of one Labour local authority which dared to oppose her.
Since 1983, I have faced a fair number of Department of Environment Ministers across the Floor of the House —the Department of the Environment is something of a political high risk area. No doubt all those Ministers hoped that, once the GLC had been safely abolished by the sheer weight of the Government's elected dictatorship, that would he the end of the matter. By scattering the pieces of the GLC around over 70 successor bodies, Ministers clearly hoped that they would be able to hide the impact of abolition.
To a certain limited extent, Ministers have been successful, given the fawning, pro-Tory press that we have, especially in London. The London Evening Standard—or the London sub-standard as it has become known—has failed completely to defend the interests and services of Londoners that the GLC used to maintain. I welcome the advent of the London Daily News, which is speaking up much more forcefully for Londoners.
As Ministers know, the embarrassing truth keeps bubbling to the surface — issues such as Hampstead heath, Thamesmead, seaside and country homes, GLC mortgages, the Woolwich ferry, London scientific services, the GLC lorry ban, the London research centre, road safety, traffic control, strategic planning, waste disposal, arts funding and the voluntary sector. In all these, there is daily evidence of the inefficiency, disruption and chaos that are becoming the reality of GLC abolition. London is muddling through, as we always knew it would, but the strains are clearly showing. I shall return to some of the issues—although I will not be able to deal with them in depth; there will be other opportunities to do so before this Parliament ends.
I start with costs. When the Government were finally pushed into saying how much they believed abolition of the GLC and the metropolitan counties would save in terms of staff and money, they came out with the figures of 7,000 savings in staff and £100 million savings in costs. I believe that those figures were simply plucked out of the air; the Government refused at the time, and have consistently refused since then, to give a more detailed breakdown of the figures.
A reply to a question from my hon. Friend the Member for Copeland (Dr. Cunningham) on 18 December showed clearly that the 7,000 savings in staff had been reached by a rough subtraction of full-time staff in position in local

authorities in June 1986 from those in position in June 1985. A figure of 1,100 was allowed for staff transferring to other bodies on abolition.
Will the Minister provide a breakdown of those 1,100 jobs and tell us how many were in London? Did that figure take into account staff transferring to, or recruited by, the Thames water authority, English Heritage, Government Departments, London housing units, the London strategic policy unit, the London waste regulation authority, waste disposal authorities and coroners and magistrates committees? We need that breakdown so we can test the Government's estimates.
The figure of £100 million of savings was given in 1984 and has never been revised; nor has it been analysed by Ministers, despite frequent requests that it should be. The figure has been reduced to £40 million for the first year, because of the impact of redundancy payments. Will the Minister tell us the amount paid in redundancy in the first 12 months, how many claims are outstanding and how much is involved?
The Association of London Authorities and the London strategic policy unit recently issued a document in which they calculated that the total cost of running services that used to be provided by the GLC is £178 million more than it was in the last year of the GLC's existence. They calculate that those services cost £1,011 million, compared with £833 million under the GLC.
I believe that the Government are dressing up the statistics to try to give respectability to their case. It is an example of the creative accounting which the Government spend so much time condemning Labour local authorities for using. Of course, those authorities have better reasons for their action, because they are trying to defend jobs and services in areas facing Government penalties and constant attacks.
I do not want and I am sure that no one in London wants— a sterile exchange of conflicting figures between Labour local authorities and the Government. Therefore, in the interests of London, fair debate and political objectivity, I challenge the Minister to commission an independent audit to assess the financial impact of the abolition of the GLC. I will accept any auditors that the Minister proposes—except, of course, any of those connected with the hon. Member for Ynys Môn (Mr. Best).
I now wish to develop some of the issues that I mentioned earlier. It is well known that the preferred option for Hampstead heath would be for the London borough of Camden to run it. For a start, 84 per cent. of the heath is within the borough's boundaries, but Camden is a Labour borough and the Government and their creature, the London residuary body, do not want to transfer the heath to a London borough unless it is prepared to pay the full cost of running it. That would be grossly unfair, because Hampstead heath belongs to London as a whole.
I understand that the latest proposal, which surfaced last month, is for the City to administer the heath, with £1 million of City cash and £800,000 which is to be raised from a £15 million trust fund set up by the London residuary body. If that proposal goes through, London boroughs will lose £15 million of capital receipts.
Does the Minister think that a return of £800,000 on a £15 million trust fund is value for money? If he handed the £15 million to me, I could raise more than £800,000 on it. However, the Government will accept the proposal


because they would like to see the City take over Hampstead heath, even though it would be financially and politically unacceptable to the London Labour boroughs.
I have mentioned previously the 3,400 seaside and country homes built by the London county council and the GLC for retired Londoners. The situation is still one great mess. We had a debate on the London residuary body in December, when I asked the Minister what would happen to the seaside and country homes. He replied :
I hope that satisfactory arrangements will shortly be concluded for the future of those homes." — [Official Report, 19 December 1986; Vol. 107, c. 1523.]
When will the transfer from the LRB be effected? What new housing associations will be involved in taking over the homes, now that the deal with the Anchor housing association has come to a halt? The Minister must tell me, and, more important, the 3,400 tenants, what will be the average rent rises for those homes.
Will the homes still be available for Londoners after they have been split up amongst a plethora of housing associations? Will the Minister allow any of those homes to be sold off? As a large number of housing associations will be involved, what mechanism will the Department of the Environment use to make sure that those homes are still allocated to retired Londoners? When will all this be completed? That is what we need to know.
I do not want the Minister to do as he did on 19 December, and say that I am spreading alarm and despondency among the people in those homes. The Government started the whole business with the abolition of the GLC and they are responsible for those peoples'fears and worries. It is up to them to allay those fears by making an early announcement.
Thamesmead is another fine mess for London. It was to be transferred by the last Under-Secretary but one—or two, I do not remember exactly—who said that the transfer would be effected in a few days. Now, the Government have been forced to direct the London residuary body to dispose of Thamesmead at a price below the market rate—and, I hear, on hire purchase. I believe that the Thamesmead trust will have to sell off some 3,600 homes with vacant possession over the next 12 years to pay off the debt. That will change the whole nature of Thamesmead. Rents will rocket during the next few years and tenants will effectively be forced out of Thamesmead in order to make way for vacant possession sales.
I come now to the London waste regulation authority. Abolition of the GLC split up London's waste disposal arrangements by creating for statutory waste disposal authorities — three voluntary groups, plus Bexley in Kent. What a mess! It is, perhaps, appropriate to leave a mess to try to clear up London's mess, but it is an awful mess and the Government know that. All the experts told Ministers at the time that the GLC operated one of the world's most efficient waste disposal systems, but, as that meant keeping a Londonwide body in existence, the Government would not wear it. Therefore, we have this terrible mixture of authorities to run waste disposal in London. The health and safety of Londoners is now being put at risk merely because of political dogma emanating from the Prime Minister and working down to junior Ministers.
There are in London more than 1,000 known producers of special waste and the work that the London waste

regulation authority is doing prevents it from giving full inspection cover to those known waste producing concerns. I have mentioned only known producers, but up to 20,000 tonnes of waste are illegally dumped in London each year. As many as 4,000 of those tonnes are special waste.
The situation is getting out of control. The director of the LWRA said that the authority could no longer manage the job. The failure to agree an increase in staffing at the LWRA now means that Londoners are being exposed to risks from toxic—perhaps lethal—substances, which are being illegally dumped in the Greater London area.
I am rushing to try to get through my speech in the few minutes left to me. I shall deal quickly with the voluntary sector. If I can catch the Minister's eye, I should like to show him a copy of the book, "After Abolition", and ask him whether he has seen it. It was published in January by the National Council for Voluntary Organisations and the London Voluntary Service Council. I intend to seek a debate on some future occasion to raise the whole matter of the voluntary sector in London and the impact that abolition has had on it.
The book lists 46 voluntary organisations that are known to have closed in London since abolition, a further 21 that are about to close and 120 that are facing eviction or increased rents on properties that now belong to the London residuary body. A new round of cuts has just been agreed under the London boroughs grant scheme. That was done a couple of nights ago. The cuts were imposed by the Tories with the support, on this occasion, of the Liberals. The Secretary of State has imposed a budget following the boroughs' failure to agree one after seven attempts. The position of the voluntary sector in London can only worsen as the Government steadily reduce the funds available.
An important feature of the voluntary sector is the arts. I know that the Minister is not primarily responsible for them, but there are impacts on the arts in London that arise from the abolition of the GLC. It has been discovered by those who operate the grants scheme for the London boroughs that the greatest demands come from arts organisations in London. One of the major demands that they are making upon the scheme is for the provision of capital resources. Unfortunately, the scheme is not permitted to provide capital grants. I understand that permission has been sought from the Secretary of State and that the Government have refused to grant it. I hope that the Minister will tell us why the Government have taken that approach and whether he is reconsidering the matter.
It is worth noting the effect on London when Liberals assume some control. Tower Hamlets has suffered badly as a result of the GLC's abolition, and it has now been decided by the Liberal council to cut the funding of arts clients from £228,400 to £7,400. That is what the Liberals do when they gain control of a London borough. This cut of 97 per cent. leaves 14 of 17 arts clients without any funding, including such well-known organisations as the Half Moon theatre, Camerawork and the East London African Arts Group. This is not directly the Government responsibility — responsibility rests with the Liberal-controlled Tower Hamlets council—but the council will say with some justification that the position has arisen because of the GLC's abolition, rate capping and all the other onslaughts that the Government have been making on local authorities in the capital.
The Government have sought to hide the impact of the GLC's abolition behind a welter of uprovable statistics which they refuse to detail in any way that will make them meaningful to us. They have set up a host of quangos and joint boards — which, together with the borough councils, have responsibility for trying to clear up the mess that has followed the GLC's abolition. All the time, the Government are steadily reducing the central Government funding that has been used to lessen the financial impact of abolition. As things drift from bad to worse, the Government hide behind the various quangos and successor bodies and say, "This is nothing to do with us. This is a matter for the successor bodies."
This will be one of the last occasions on which I shall have to raise these matters. Before long, there will be a general election and the Government will be out of office. The GLC will be brought back, and I believe that all London will rejoice.

The Parliamentary Under-Secretary of State for the Environment (Mr. Christopher Chope): I noted that the hon. Member for Newham, North-West (Mr. Banks) did not make his final remarks with much conviction. I have read in today's edition of The London Daily News—I do not hold prejudices against one newspaper like the hon. Gentleman; I read all newspapers—that the former and unlamented leader of the GLC is now in Australia. I think that there are many who hope that he will stay there. Apparently he has been promoted in Australia as the Lord Mayor of London. He has been talking to the people there about the inadequacies of post-GLC London. Even The London Daily News admits that the Australian public are somewhat mystified.
Even more oddly, Mr. Livingstone is talking about giving a lecture to a conference on the role of local government in sustaining urban renewal. Where urban renewal in London has been practised efficiently and well, Conservative-controlled authorities have been responsible. Since the transfer of housing responsibilities from the GLC to the boroughs, the quality of life in responsible, Conservative-controlled boroughs for tenants of houses and flats has increased immeasurably.
It is something of a seasonal ritual to have a debate on the abolition of the GLC. As memories become more cloudy and people become less concerned about the GLC, so the arguments become more jaded. The fact is that the GLC has been abolished and no one wishes to resurrect it in its old form. I understand that the Labour party has put forward a proposal for a revamped regional authority for London. The principal plank of that proposal is to allow the services that were transferred to the boroughs — to which the hon. Member for Newham, North-West and the Labour party objected — to stay with the boroughs. That is the wish of London boroughs, whether under Conservative control or under Labour control.
The hon. Gentleman made much play of suggesting that the GLC's abolition has led to increased costs. The facts say otherwise. Abolition has, emphatically, led to savings. In measuring those savings, it is important to distinguish between those that arise directly as a result of abolition, such as the initial savings in posts, and those that can be realised or thrown away according to the policy decisions of individual borough councils. I have not studied the ALA report in depth. I often think of the initials "ALA" as meaning the Association of Labour

Authorities, but I am told that it means the Association of London Authorities. But, of course, they are all Labour authorities and have a particular axe to grind. The ALA was extremely reluctant to send the Department of the Environment a copy of the report. I cannot understand why.

Mr. Tony Banks: Perhaps the Minister will accept an Easter present from me afterwards. He can have my copy.

Mr. Chope: If the hon. Gentleman is going to offer me his marked copy of the ALA report, I should be delighted to receive it.
At first sight, the arguments are convoluted and based on sweeping assumptions. The report fails in any way to controvert the simple facts that more than 6,000 posts were saved immediately on abolition of the GLC and metropolitan county councils, with clear prospects of long-run annual savings of £100 million, and that significant financial resources have been released, notably in the form of some £431 million in cash now being distributed to successor authorities by the residuary bodies. The report attempts to compare expenditure by boroughs on services inherited from the GLC. It does not, however, reflect profligate spending by those boroughs that have chosen to pursue the GLC's spendthrift polices without a thought for possible savings.
On the first anniversary of the transfer to Wandsworth council of services that it had inherited from the GLC, I had the privilege to be invited to Wandsworth and to her how matters have progressed in that borough. Wandsworth council has reckoned that it has saved a substantial amount of money as a result of taking over services formerly run by the GLC and running them more efficiently. Would that that had been the attitude of all authorities that have taken over those inherited services.
Wandsworth council estimates that there was an initial reduction of £1·5 million in the running costs of the directly transferred services and that the repayment of balances from the London residuary body provided £2·7 million. The council said that those two savings equated to an 11·2p rate when Government grant entitlement on the money was added. Further savings amounting to a 2·8p rate have been generated for the current year via a reduction in the LRB and Western Riverside waste authority levies and a further 4·4p in LRB balances which have been distributed.
To those total savings of 18·45p, or £46·12, for the average ratepayer must be added further savings in 1987–88. Major new savings which are starting are the £99,000 a year on scientific services and £104,000 a year from London Research. With other savings immediately in prospect, the leader of the council reports that he envisages total savings of almost £50 for the average Wandsworth ratepayer. That would be equivalent to 17 per cent. extra on rate bills if the GLC were still in being.
Those are the facts that have been given by the leader of just one local authority. Those people who live in the vicinity of Battersea park can see how the park is now run much more efficiently and in accordance with the wishes of local residents. Seeing is believing.
The hon. Member for Newham, North-West will never accept that the GLC should have been abolished, if, indeed, he accepts that it has been abolished. Therefore, it is worth reminding everybody about the substantial savings that there have been. I shall summarise the main categories of savings that have come from abolition.
In manpower, in excess of 6,000 posts were saved immediately. We predicted 7,000 posts in the long run and I am confident that that will be achieved as residuary bodies wind down their remaining activities. A total of 7,000 posts equates to a £100 million saving to ratepayers every year and about half of that is in London.
Secondly, there are savings in financial resources. Abolished councils had locked up vast amounts of ratepayers' money and that is now being released. In London, the London residuary body is distributing to the boroughs in its first two years £129 million in revenue balances, £141 million in capital receipts and £634 million in capital spending power. The cash distributed amounts to around £100 for every household in London. There is more to come as the residuary bodies sell off additional surplus land and property.
Thirdly, on the matter of land and property, one of the residuary bodies' principal tasks has been to sort out the property portfolio. It is clear that the GLC and metropolitan county councils were hoarders of property on a grand scale. The Government are encouraging residuary bodies to sell as much of the surplus as they can. The proceeds of those sales will be returned to the ratepayers of the abolished councils. The estimate by the residuary bodies is that by the end of the year, they will have generated some £300 million of capital receipts, mainly from the sale of surplus property. In the first year alone, the LRB has sold property worth over £30 million. Capital receipts are being generated, to the benefit of boroughs and their ratepayers.
The fourth major saving from abolition is the success in devolving functions. The chaos and disruption predicted by some has been conspicuous by its absence. The boroughs have absorbed their additional functions with barely a ripple. The new joint authorities, representing the boroughs, are working satisfactorily. Roads are still maintained and fire engines still turn out. That should bring benefits from leaner operation and avoidance of duplication. It is up to the successor authorities to grasp the opportunities that have been offered to them as a result of abolition.
Accountability to the electorate has also increased, because services have been brought closer to the people.

Mr. Tony Banks: In view of this enormous success story why will the Government not submit it to independent audit?

Mr. Chope: The figures on manpower savings, for example, are obtained from "Joint Manpower Watch", which are submissions by local authorities to the Department of the Environment. The figures for additional staff are provided by the boroughs themselves under section 56 of the Local Government Act 1985 and the figures for compensation payments are provided by the residuary bodies. Obviously, all those figures for the individual authorities are subject to the audit of those authorities. Certainly, if the hon. Gentleman would like, I am prepared to suggest that the document of the Association of London Authorities should be discussed by people to see the extent to which it represents a fair picture of post-abolition London. The hon. Gentleman's selective quotation from what has happened, fairly convinces me that it is a travesty of the truth.
Before I gave way, I was going to refer to the fifth major area of success following abolition — the effect on services. It is emphatically for successor authorities to decide how they wish to run inherited services and at what level. Some boroughs are doing so with only a minimum of additional resources and it is clear that some boroughs have chosen to seize upon the excuse of abolition to increase their staff even more than is necessary.
A prime example is the irrelevant London strategic policy unit, which I understand is referred to as the GLC in exile. That employs over 300 staff at a cost to the ratepayers of Camden and the other supporting boroughs of some £7 million annually. It is not a legitimate additional cost of abolition. It is a choice by those profligate authorities to increase the burden upon their ratepayers.
If one looks at what has happened in the responsible authorities, one can see the benefits that have flowed from abolition and the benefits that will continue to flow in the coming months. I expect that there will come a time when even the hon. Member for Newham, North-West will no longer lament the demise of the GLC.

Third-world Debt

1 pm

Mr. Colin Moynihan: The timing of this debate could not be more significant, as this week the Paris Club initiative on Third-world debt is being discussed with the relevant committees of the World Bank and the International Monetary Fund.
They are discussing a plan for rescheduling the debts of the financially ruined sub-Saharan African countries. I understand that that plan has the British Government's full backing. That backing recognises that, in practical terms, the problems of the sub-Saharan African countries should no longer simply be left to the comforting words of the missionary whose vocation has often been to alleviate the suppression and depression of an often hungry people. Those people have experienced a deterioration in their standards of living while their Governments pay obeisance at the twin altars of low commodity prices—aggravated by western protectionism — and the immense burden of debt servicing, the worldwide value of which stands at over $1 trillion.
During those discussions, I hope that full consideration will be given to the rescheduling of Government-to Government debt to over 15 to 20 years or more. I hope that consideration will be given to further grace periods for repayment and substantially reduced interest rates. In my view, those considerations are critical to tackling the problems of Third-world debt, because so many African countries face a net outflow of capital in a period of unprecedented economic crisis. If those considerations are contained in the Government's initiative and the initiative resulting from the committee meetings of the IMF and the World Bank, nothing but good can come from it. It should receive the support of hon. Members on both sides of the House.
The subject that the Paris Club is considering has also been a matter for considerable attention and consideration by the sub-committee of the all-party parliamentary group on overseas development. It has been considering Third-world debt and the management of that debt. It has been sitting for some six months and has considered a whole range of issues in great detail related to new initiatives for debt. I congratulate everyone who has been working on that committee for the report which I hope will be published on 5 May and which will, I hope, make a major contribution to this subject.
The report concentrates, in part, on the problems of the sub-Saharan African debt which in 1985, was estimated by the World Bank to be $85·6 billion, of which $65 billion is public or publicly guaranteed. This debt burden required an outward debt service equivalent to 35 per cent. of exports. For some countries, the burden has been impossibly high. In 1984 it represented 146 per cent. of exports in the case of Somalia and 96·4 per cent. for Sudan. That figure is projected to rise to 151 per cent. in 1986–87. In the absence of economic growth, the figure of 96·4 per cent. represents a significant loss to the country. In 1985, imports were already well below the 1980 levels. Several countries similar to Sudan effectively defaulted long ago.
The debt burden has a dramatic impact on the countries in terms of their growth and their economic and political stability. It is vital that we tackle this problem. It is a crisis that affects us all and a crisis for which we are all responsible and for which we all hold a responsibility to

find a solution. Unless we tackle the debt problem faced by these countries we cannot hope to solve the central political problems that they lace, the appalling poverty levels and the famine conditions many have experienced in recent years. Regrettably, they will be matters for the future and will be experienced on a far larger scale than we have seen to date.
I hope that a number of important additional features will be considered by the Government regarding sub-Saharan Africa— they have already been considered by the all-party parliamentary group. Not only are official creditors dominant, but often over 50 per cent. of long term debt is owed to the IMF and the World Bank alone. The World Bank International Development Association credits are made on soft terms but they cannot, at present, be rescheduled. As a result, African debtors have less flexibility than their Latin American counterparts. I hope that that will be considered. By 1985, the African debtors were not only suffering a virtual suspension of new bank lending, but also a collapse of IMF net inflows—from more than $1 billion in 1981–83 to $118 million in 1985, with several countries in arrears.
As a result, Governments often have to raise private bank loans at high rates of interest to pay off the IMF arrears, start new reform programmes and gain access to fresh development finance. The social consequences of such austerity are clear. First and foremost, austerity and stabilisation programmes, applied anywhere in the world, which they have to service the debt, have led to recessive characteristics in respective economies, characteristics that add to the poverty and to the problems that sub-Saharan Africa has had to face.
However, even the Paris Club public debt reschedulings that have occurred have been far from the ideal solution. Short-term reschedulings, which have to be repeated year after year—there have been 65 by 18 countries up to 1986 — or which collapse as a result of being tied to IMF performance criteria, show a need for a new approach if fresh bunching is riot to occur in the late 1980s.
Many African Governments, including those faced with famine in 1984–85, have responded to international pressures to embark on reforms, even in politically sensitive areas of economic management such as privatisation, the introduction of incentive schemes, devaluation and the abolition of subsidies. They have done more than simply pursue policies of budgetary restraint, although that has also been necessary.
Exchange rates have moved to more realistic levels and producer prices to farmers have been raised to stimulate export crops and domestic food output, to the extent that many countries are now having to manage food surpluses. In return, however, Africa has not enjoyed the promised upturn in prices and world demand for the commodities on which it remains dependent for growth, nor have tighter fiscal and monetary policies ushered in the return of voluntary bank lending and foreign investment.
That is the view of the all-party parliamentary group on overseas development. I hope very much that the Minister will find agreement with that view and that the Government will continue to take new initiatives to tackle the sub-Saharan countries' debt problems, and not regard it as a matter of precedent that should be avoided on the grounds that it will have repercussive effects on Latin America. The problem should be looked at in isolation. On


a case-by-case basis, to assess how best to handle the extremely difficult problems posed by the international debt crisis.
Government innovatory interventions are particularly necessary for the poorer countries. New funds from the commercial banks are not likely at present, so national creditworthiness is unlikely to suffer significantly from official debt write-offs. In many cases, Sudan being the most extreme, there is some frank admission that the debt outstanding can never be paid off and that continued attempts to service it are undermining recovery. Solutions to the low-income countries' problems will necessarily differ from those of stronger debtors such as Nigeria and the Ivory Coast. To that extent, it is important to endorse the case-by-case approach that I mentioned, which the main creditors have at last adopted.
Low-income sub-Saharan countries tend to owe the buld of their debt to official creditors, so there is greater opportunity for Governments to play a part. Although some are now in serious arrears, those forms of debt have not traditionally been eligible for rescheduling. As a result, African solutions have focused on increasing concessional bilateral and multilateral aid flows, except for the handful of countries that borrowed heavily from the banks.
I hope that due consideration will be given to the need to look at rescheduling and to extend the important work that this country has done and the initiative that it has taken through the Overseas Development Administration in appropriate write-offs on a case-by-case basis, which have been necessary and which I believe have signalled to the world community the importance of extending that initiative in the admirable way that the Government have done to date. Each country's financial problems are different, so there are bound to be different financial solutions, not just for the big Latin American debtors, but for the poorer countries, especially those in Africa the debts of which are owed not mainly to banks but to Governments and international institutions. All share responsibility for the crisis of the debt problems facing the Third World.
The central paradox faced by many of those poorer countries is that developing countries are now paying back to their creditors more in interest on the principal than they receive in new loans. Countries that are already very poor are suffering. Imports are being curtailed and world recovery — not just that of developing countries — is being undermined. The largest debtors are in Latin America. However, the debt burden is intractable for many of the poorer African countries upon which I am concentrating in this part of my speech. Their debt is mainly owed to Governments and multilateral organisation rather than to banks, as in the case of the majority of Latin American debt. In many cases, it is a struggle for those African countries even to pay the interest.
An innovative approach is required that will extend beyond narrow financial solutions and share the burden of adjustment between the debtor countries, banks and the creditor Governments. Debt has ceased to be purely a banking problem and now requires a political solution. With firm political will, the Government could again lead an international initiative to provide debt relief. I understand that the discussions currently being held in Washington show that that is possible. I am delighted also to learn—and I hope that we will hear more about this

from the Minister—that the British are taking a very important lead in tackling the kind of political and practical solutions to the problems of managing Third-world debt.
I want to consider a subject that has taxed the minds of a number of hon. Members and Ministers and express gratitude to the civil servants who have spent many hours considering a specific concept upon which I think we should concentrate—debt development swaps. I do not want to lead further down the technical road on which we have already embarked in correspondence and in the House. However, I want to place on record the concept of debt development swaps, not only within the Bolivian context which I have particularly pursued, of linking the debt problems faced by Bolivia with, I hope, an imaginative solution to tackle its drug problem through the triennial narcotics programme which seeks to eliminate all cocaine from Bolivia within three years.
I want to describe the concept of debt development swaps. A country whose commercial debt is already heavily discounted can negotiate with a donor agency to trade debt relief for an agreed development programme. The example I have used is Bolivia, whose outstanding debt of 2·5 billion—f which $800 million is owed to commercial banks — is today trading on the London secondary market at 8 per cent. of its nominal value. The banks holding that debt have already made provision for substantial losses and could be persuaded to sell the $800 million debt for around $80 million if there were a willing Government purchaser or group of Government purchasers.
A donor Government or several donor Governments who already want to spend $80 million on an aid programme inside Bolivia could thus purchase the debt at a deep discount, while, to implement the domestic aid spending—in this case, the drug eradication programme in Bolivia—the Bolivian Government would simply have to raise $80 million-worth of local currency through taxation or other means. Commercial creditors would receive hard currency in redemption of the debts that they hold at or above the market rate. The donor Governments would have to raise no new money to fund the development programme, as, hopefully, plans will have been made in advance.
Although that may not necessarily be completely accurate with regard to Bolivia — I urge Ministers to increase spending programmes on drug initiatives in Bolivia—the principle could be established where we are financing development programmes in advance and using the debt development swap and the purchase of secondary market debt as a financial mechanism.
In other circumstances, part or all of a country's commercial debt could be brought back in that way and agreed development programmes could be a target for counterpart spending. My hon. Friend the Minister is aware that I am keen to see the Government take an initiative on this matter. Even if there are difficulties over its implementation in a specific programme such as drug eradication in Bolivia, I hope that due consideration can be given to using the secondary market in debt to a far greater extent than we have to date as Governments for the funding of development programmes.
There is clearly a large and growing market for secondary market debt in less developed countries. I have before me a recent document that shows debt trading in a whole range of countries. It reveals commercial debts


from Honduras at an indicated bid price of 40, while the Dominican Republic is at 45. There is an indicated bid price to Bolivia at 8 with Rumania at 88, Turkey at 97 and the Ivory Coast at 76 cents to the dollar. I am glad that the Government seem to be supporting the initiative.
On 29 January, I asked my right hon. Friend the Chancellor of the Exchequer whether he agreed
that the existence of a discounted secondary market in debt offers substantial opportunities for the Government to use this financial mechanism to fund developing countries' programmes.
I was delighted when he replied :
My hon. Friend is right. The debt problem is still a very serious one, which all the major countries are addressing. A number of methods such as those that he has suggested need to be brought into play." —[Official Report, 29 January 1987; Vol. 109, c. 481]
I hope that the initiative will lead to further consideration of this financial mechanism for funding development programmes, and that on 5 May serious attention will be given in the House and in the country to the new report on managing Third-world debt which will be published by the all-party parliamentary group on overseas development. I have read the report in draft, and I believe that it will make a significant contribution to the debate on overseas development not only in the House but internationally.
I hope that my hon. Friend the Minister and his colleagues will study the report in depth and will respond positively and publicly. I hope that they recognise that, together, we can consider new initiatives, as my right hon. Friend the Chancellor did this week in Washington, and move forward to tackle the problem of Third-world debt, which is central to the future of any development programme in any developing country which suffers under the overhang of outstanding debt.

The Economic Secretary to the Treasury (Mr. Ian Stewart): I congratulate my hon. Friend the Member for Lewisham, East (Mr. Moynihan) on obtaining another debate on this important issue. I was interested to have confirmation from him that the report from the working party on debt of the all-party parliamentary group on overseas development will be published in less than a month, and I shall study carefully its comments, which he has foreshadowed today.
As my hon. Friend said, it is especially appropriate this week, when international economic issues are being discussed in Washington, to debate this subject in the House. My right hon. Friend the Chancellor of the Exchequer has launched his new proposal for the debtor countries of sub-Saharan Africa. I am glad to have the opportunity to give the House more information about that important initiative. We have set the process in train. It will be carried forward with other creditor nations in the Paris Club and elsewhere, and I am glad to say that some have already responded sympathetically.
Let us consider the debt problem more generally. Since the crisis of 1982, the policy has been to provide financial support to debtor countries in return for their adopting policy reforms. That was given additional impetus at Seoul in 1985 with the Baker initiative. But our strategy since 1982 has been to consolidate several achievements. So far, those achievements are that many countries have adopted reform programmes; the International Monetary Fund and the World Bank have expanded their role in

supporting countries that adopt sustainable policies; and, since 1985, those two international institutions have been working much more closely together. That is a welcome development.
The banks, for their part, have strengthened their capital base and have increased their debt provisions, which are now at a more realistic level than they were. In the meantime, the world economy has continued to grow : since 1982, growth has averaged over 3 per cent. per annum, and inflation has fallen overall by about five points.
Although many developing countries suffered from the fall in commodity prices, including the price of oil, most have stood to benefit from faster growth of imports into OECD countries, and interest rates are now six points lower than in 1982. The United States dollar is down from the abnormally high levels of a while ago.
There should, however, be no delusions that the debt problem does not remain acute. In particular, the British Government have become increasingly concerned over the past year at the progressive weakening of IM F conditionality. We must insist that the fund management will always require adequate adjustment measures in its programmes, including adjustment on the supply side. Creditors in the Paris Club should likewise not reschedule debt repayments without firm assurances that adequate policies are in place.
My hon. Friend talked about debt development swaps and other related market aspects. I acknowledge the helpful role that market mechanisms can play in the debt strategy as a whole. Secondary markets in debt can allow claims to be spread more widely, and market prices can give useful indications of the progress that various debtors are making. Even where market transactions result only in the redistribution of fixed claims within the international banking system, those transactions are a useful channel through which individual banks can adjust their portfolios.
The Government wish to encourage the market process and the greater securitisation of debt, especially where it spreads risk outside the banking system where it is now concentrated. Although they are not a panacea — the Government support the development of market mechanisms for handling debt, especially the growing number of schemes involving the transformation by various routes of fixed debt into equity so that risks and rewards are shared between creditors and debtors.
From the debtor's point of view, debt buy-back schemes such as that envisaged for Bolivia, and debt-equity schemes, which exist in a number of countries, can reduce the amount of debt outstanding where it is repatriated or converted into equity at a discount. It is, of course, for individual banks to decide whether they wish to participate by selling their loans to developing countries. Some may not wish to do so for a variety of reasons connected with their overall banking relationships with the country or countries concerned, and that must be taken into account.
The adjustment process that many debtors must undertake can be helped enormously by adequate flows of private direct and portfolio investment, and a stemming of the flight of capital out of debtor countries. That requires those countries to adopt sensible economic policies : positive real interest rates, realistic exchange rates and sensible tax policies. Above all, if capital flows are to be encouraged, it makes no sense for either creditors or


debtors to maintain barriers that impede them. The British Government abolished all controls on such flows in 1979, and Britain is second only to the United States in its scale of direct investment in developing countries.
As for sub-Saharan Africa, what we are urging is essentially a reinforcement of the present strategy. First, there should be a strengthening of policy reform by debtor countries, supported by finance from creditors, the World Bank and the IMF. Secondly, industrial countries should maintain policies for sustainable growth and open markets. Thirdly, there should be support for the increasing development of market mechanisms.
Middle income debtors ought to have sufficient resources to enable them eventually to service their debt, once appropriate reform policies are firmly in place. However, there is one group of debtors for whom all this will clearly not be enough—the poorest countries of sub-Saharan Africa. Some of these countries have so few natural or human resources that they have no hope of servicing all their debt in the foreseeable future. These countries typically have a gross domestic product per head of below $350. Many of them have less than $200. We must recognise that they have a special problem.
My hon. Friend compared those countries with the countries of Latin America and pointed to the fact that solutions are not necessarily to be transferred from one group to the other. He was absolutely right to make that important point.
Governments can take the lead in helping those countries in Africa that I have described, particularly because most of their debt is official, whereas most of the debt of the middle income countries is owed to commercial banks. In putting forward our initiative, we are not the first to pick out sub-Saharan Africa for special treatment. The famine of two years ago again reminded us all of Africa's particular problems. The United Nations recognised this, with its special session on Africa in May 1986, and the World Bank has had its special facility for Africa.
Although I acknowledge the needs of those African countries, I must emphasise the need for their commitment to reform. Their problems have been caused, in part, by reliance on one or two commodities for export earnings,

by weak administrative capacity and by the legacy of mistaken policies in agriculture, industry and urban subsidy. A growing number of these countries now recognise the need to adopt adequate policies for economic adjustment and to work closely with the IMF and the world Bank. Where the poorest and most heavily indebted countries of sub-Saharan Africa are prepared to adopt appropriate policy reform, all creditor Governments should, in their turn, be prepared together to offer a reduction in their debt service burden. My right hon. Friend the Chancellor of the Exchequer has been making that proposal this week in Washington.
The proposal has three elements. The first is the conversion of aid loans to grants. Britain has almost completed this process for the poorest sub-Saharan countries. The second is the rescheduling of debt by the Paris Club on more generous terms, with longer grace and repayment periods. The third is the reduction of interest rates to several percentage points below commercial rates. The British Government would be prepared to consider funding interest relief in such a way as not to affect existing aid programmes to those countries.
A debt package along those lines would give the poor countries of sub-Saharan Africa a better chance to get on the road to economic recovery. As my right hon. Friend the Chancellor of the Exchequer said yesterday in the interim committee, that would provide them with some light at the end of the tunnel. There is now an urgent need for the richer countries of the world to recognise the plight of the poorest countries in Africa. Britain has already played a constructive role in converting aid loans to outright grants, an example that I hope will be more widely followed.
Now, with this new initiative for the sub-Saharan countries, the British Government are again taking the lead by putting forward a three-point plan to tackle the problem of the accumulating debt of those countries. In the poorest African countries, the point has been reached where any proposal that does not include a measure of relief from the relentless burden of debt servicing cannot be regarded as realistic. If such a scheme is to succeed, it goes without saying that the Governments of all the other creditor countries will have to do their share. Therefore, I hope that they will be prepared to consider our proposals seriously.

Rolls-Royce plc

Mr. Dave Nellist: It will be viewed with amazement, not only in Coventry but throughout the country and possibly even internationally, that a world-famous firm such as Rolls-Royce can be transferred from the public to the private sector, involving a transfer of about £1,300 million of public assets, with a mere 30 minutes of parliamentary debate.
This "piratisation" exercise—in reality, that is what it is — owes nothing to the Government's stated aims of increasing competition — Rolls-Royce has no British competitors—or of widening share ownership, especially given the terms and conditions for the flotation which were announced this week. Not that any widening will take place because, today, Rolls-Royce is owned by 55 million people, but in four weeks' time it will be owned by only a few thousand who will hold bits of paper and claim that they own that national asset.
Yesterday the Secretary of State for Defence asserted that I had no knowledge of, or constituency interest in, the defence of the 2,000 workers and their families at Westland, who face the dole as a result of his anouncement yesterday. I refute that because my job in this place is to try to defend, to the best of my ability, all workers facing the horror and iniquity of unemployment, through which I had to live for four years. Such a claim will not be made today because I represent directly many thousands of Rolls-Royce workers and their families who work in Coventry, and many who work for the 61 local firms in Coventry, Nuneaton and Exhall who rely on major orders from Rolls-Royce and who are suppliers for the two plants at Parkside and Anstey.
Certainly, at Parkside, the plant within my constituency of Coventry, South-East, there is overwhelming opposition to the privatisation.
The Minister of State for Defence Procurement has even got the names and addresses of more than 80 per cent. of the shop floor manual workers who signed a petition opposing his allegation that most workers at Rolls-Royce relish its privatisation. Last Friday, 40,000 workers throughout the Rolls-Royce group took industrial action against this enforced sale, demonstrating with their feet their total opposition to the privatisation. That opposition runs wide and deep among the work force at Rolls-Royce.
Early in 1971 I was an apprentice attending the Rolls-Royce technical college at Filton in Bristol. Like many others, I was called in to be told of the collapse of the company. I witnessed the way in which, in 24 hours of parliamentary time, the then Tory Prime Minister, the right hon. Member for Old Bexley and Sidcup (Mr. Heath) took Rolls-Royce into Government hands. That time scale, showing how quickly this place can operate to widen public ownership, is perhaps one lesson that I am prepared to absorb from that ex-Prime Minister.
When Rolls-Royce was last in private hands it collapsed because it could not stand the strain of escalating research and development costs. It went bankrupt because of shortages of funds. Huge amounts of public money have been pumped into the firm during the past 16 years. The work force has been forced to make enormous sacrifices, especially in terms of the 20,000 jobs that have been lost during the past four or five years. Now that the company is again making a profit and taxpayers are just beginning

to get some of their money back, the Tory Government intend to plunge Rolls-Royce back into the doubt and uncertainty of private ownership. Such profits as there are will not now go to taxpayers who made it all possible but to the new speculators who hold the shares. There is doubt and uncertainty. The future for Rolls-Royce cannot be challenged.
This week we have seen the difficulties with the new engine development and the Airbus project—potentially a major blow to the company's prospects. Moreover, there is in existence an "ice cream and banking" document that projects possible future plant closures. Although Ministers in the House have brushed it aside as only a draft and written by a junior member of management, the company describes it as having been superseded. If one of those projected plant closures—East Kilbride and Parkside in Coventry have been mentioned — was Coventry, Parkside, 3,000 jobs could be lost because 2,500 work there directly and 600 work in the component suppliers.
A closure would mean the loss of £30 million worth of wages every year in the local economy. Even discounting the £10 million that finds its way to the Treasury each year, £20 million worth of purchasing power would be lost to Coventry. Therefore, a further 400 jobs could be at risk in shops and other businesses which rely on the trade of those who spend their wages from Rolls-Royce.
The skill base of the city could deteriorate and the costs to the Treasury in dole and supplementary benefit could be huge. Even putting that aside, a company memorandum to its senior executives says that they should not worry about another 1971 crash as
The institutions (clearing banks, insurance companies, merchant banks etc.) provide sophisticated recovery and rescue facilities
which were not available in 1971. It is ominous that the company should even consider the implications of another collapse.
Such threats hang like the sword of Damocles over the workers in Coventry and other Rolls-Royce plants and their families. They have watched past piratisation exercises and seen new shareholders take the short-term view and maximise profits as quickly as possible. They have seen job cuts at British Telecom and Associated British ports. When we talk about Coventry and privatisation in this Chamber we are often told to consider the expansion of Jaguar and, yes, in recent months employment has increased there. However, I remind the House that next door to the Rolls-Royce Parkside site is the Coventry Climax site, which was privatised in 1981. Under private ownership 80 per cent. of the original 3,000 jobs vanished and the company collapsed in the latter part of 1986. I remind the House of the haemorrhage of jobs following privatisation of Self-Changing Gears and Alvis, both of which are ex-publicly owned companies.
Workers in Rolls-Royce and elsewhere have seen pay held back and even reduced in newly privatised companies. They have seen changes in and possibly raids on pension schemes, and worsening employment conditions. Those decisions have been taken largely by shareholders whose numbers rapidly dwindle following privatisaton as compression and concentration take place of the numbers who owned the original shares.
Despite Government assurances, and even private assurances given to me by members of the board of Rolls-Royce in recent weeks, those fears are real for Rolls-Royce workers. The RB211 engine primarily caused the collapse


of Rolls-Royce in 1971. Today there are problems with the V2 500 and the Superfan engine developments. Pratt and Whitney has recently taken over engineering control and direction of the V2 500 project. Superfan, with its $3 billion research and development costs, seems ominously near to travelling the same path as the RB211 in the late 1960s and early years of the 1970s.
The year 1971 was a tragedy and if the lessons of 1971 are not learned in the next three or four years of private ownership for all those who directly suffer job losses a repeat of history would be a farce.
Above the many other industries within the British economy, the aerospace industry needs long-term planning, not just because of the scale of research and development costs but because of the immensely long lead times—up to 20 years for the development of a project. It is axiomatic within the Labour movement that one cannot plan what one does not control and one does not control what one does not own.
It is my personal belief — I am one of a minority within the Labour party—supported by my union, TASS and the Confederation of Shipbuilding and Engineering Unions since 1982, that that industry requires co-ordinated planning and structured decision-making and full public ownership. This is necessary to defend Rolls-Royce against privatisation as a manufacturer of engines within the aerospace industry. Further public ownership should be extended to aerospace, to avionics and back into British Airways.
If the sale is completed, workers in the Rolls-Royce plant face a future of insecurity and uncertainty. Rolls-Royce will be a prime target for asset-stripping. There are increasing plans within the United States for protectionist measures against Japan and Europe. There are pressures within the US economy—the effects of a newly elected Democratic Congress, the decline in the value of the dollar and the pressure on the two major competitors of Rolls-Royce, Pratt and Whitney and General Electric — to bring work in-house to save the jobs of American workers or even consciously to squeeze out their only mutual major competitor, Rolls-Royce, by action leading to a possible takeover or by elimination of that competitor.
As we move towards a new world recession in the next couple of years, it is inevitable that those pressures in the American economy will be exacerbated. The Minister is smiling, but he should consider one fact. In 1985, the 140 members of the International Air Transport Association made between them a total profit of only $100 million. That would not buy even one Boeing 747. Think what a new world recession, even in the Minister's economic terms, and the cyclical nature of the aerospace industry, would mean to the future order books of firms such as Rolls-Royce. Both of Rolls-Royce's competitors are twice its size, and both are parts of larger multinationals, with the facilities of cross-subsidisation to assist the campaign to attempt to squeeze out Rolls-Royce. General Electric's attitude to the Airbus project in the next three or four weeks will be an important pointer to that direction.
It will not be beyond the wit and wisdom of the Boeskys and Bests of this world to intervene in the sale that takes place in a month's time. I make it clear, not only to the work force and my constituents, that my position on the sale is equally strong whether the purchasers of Rolls-Royce shares are domestic or foreign. Speculation,

because essentially that is what trading in shares is in that City casino down the road, is rarely a respecter of national boundaries. It goes in the direction of profit alone and will find ways round the Secretary of State's rules. Job security and the well-being of working people, their families and communities, both directly with the 40,000 Rolls-Royce workers and indirectly with the 160,000 workers in the major components suppliers, are of no concern to the accountants in New York, London or Tokyo.
Some 137 Labour Members of Parliament — significantly, not a single member of the so-called alliance — have signed early-day motion 85. On dozens of occasions, in lobbies organised by workers in the past 12 or 18 months, in business questions, in questions to the Department of Trade and Industry, demands have come from many Labour Members for a debate on this issue. This 30 minutes today is the only result of those demands, and that is because I had the luck to win a place in the ballot for this one minute to midnight affair.
Why have the Government been so afraid in recent months to use their own time to put the case for the privatisation of Rolls-Royce? Could it be because of the escalating problems with engine development, which they want to keep under wraps for the next four or five weeks so that potential purchasers of shares are not frightened off? Could it be that the Government are embarrassed at having to cancel £645 million of company debt to provide a sweetener for institutions and speculators to buy shares?
Once again, the Government are underpricing and selling cheaply a national public asset. They have already lost £1·5 billion through underpricing the sale of British Telecom, Jaguar and British Aerospace.
Coventry city council has borrowed money over the past 60 years to build houses, schools, and community centres and now owes over £200 million to the banks and financial institutions. All local authorities owe a total of about £30,000 million. If it is OK for this Tory Government to cancel £645 million of Rolls-Royce debt as a sweetener for privatisation, that will be a precedent when I call on the next Labour Government to cancel the debts of local authorities such as Coventry. Cancelling Coventry's debt, in the same way as the Government have cancelled the debts of Rolls-Royce and other privatised concerns., would release £25 million a year of debt interest charges which could halve all domestic rents and rates in the city and leave £10 million a year for the building of new houses and the repairs of existing houses. Coventry's housing crisis could be half-axed in the lifetime of a Parliament.
The whole sale stinks—from the debt cancellation to the refusal of the Rolls-Royce management, including the arch-proponent of privatisation, Sir Francis Tombs—who is not unconnected with the banks that will be profiting from the mechanics of the sale—to allow trade unions to discuss privatisation in work time, although videos and so on were used by the management to promote the sale.
The sale is a kickback by the Tories to those who support them financially at elections. It owes nothing to a genuine desire to promote the future of the industry and merely seeks to return it to the uncertainties of the anarchy of capitalism and private ownership.
I have no doubt that the debate will not stop the sale going ahead, but it gives me an opportunity to pledge to the workers and families in my constituency and to the workers in the whole of Rolls-Royce that under a future


Labour Government, I and other Labour Members will argue not only for the return of Rolls-Royce to public ownership, but for the co-ordinated planning of the aeroindustry, with wider public ownership of firms such as Westland and Lucas.
When workers own their industries and, through their traditional union organisation, have a majority say in the planning, development and control of those industries and when there is genuine control and management of publicly owned industries by the labour movement instead of by Sir Michael Edwardes, Sir Kenneth Keith, Sir Robert Reid and the others who have run those industries in the past, the jobs of aerospace workers will look a great deal safer than they do today—four weeks before the butchery of Rolls-Royce.

The Minister for Trade (Mr. Alan Clark): s: The title of the debate is the future of Rolls-Royce, and I welcome the positive nature of that title. As always, I greatly enjoyed listening to the hon. Member for Coventry, South-East (Mr. Nellist).
I would not say that the hon. Gentleman's speech was a trip down memory lane, because, alas, my memory does not stretch back that far, but I know from history books that the hon. Gentleman uses the sort of rhetoric that characterised the old, fire-eating style of Socialism in the days when there was real deprivation throughout the work force in industrial Britain. Those Socialists were responding to a real need and a situation in which there were many undesirable aspects.
Of course, the theme to which the hon. Gentleman—beside himself — could not resist returning, again and again, was the longed-for inevitability of world recession. He is longing for a recession. Extremists such as he cannot wait for a collapse of the system. They are indoctrinated to believe that it is inevitable and they recognise that unless it happens they will become more and more obsolete as political figures. That is because they are battling against a tide of rising living standards and aspirations. They are combating the growth of materialism, to coin a phrase. It is that growth that will consume them. The poor hon. Gentleman, much as I sympathise with his passion, is becoming obsolete and his inner knowledge of his fate is what makes his rhetoric so embittered. His speech was all pessimism and gloom; but in fact, the prospect is exceedingly bright.
Rolls-Royce has a special place in United Kingdom industry. It is a symbol of excellence, and a symbol of British excellence. The name itself has a unique place in our manufacturing tradition and is recognised the world over.
Rolls-Royce is not merely the proud possessor of a high place in the minds of our people: it is a company with a strong presence and a future that is full of opportunity. It competes extensively in world markets. Two hundred and seventy of the world's airlines use its engines, and 110 of the world's defence forces use them, too. It employs 42,000 people throughout the world and provides work for many more through its suppliers.
Rolls-Royce is also a profitable company. In 1984, it made pre-tax profits of £26 million, in 1985 it made £81 million and in 1986 it announced record profits of £120 million.
I cannot, of course, say what profits Rolls-Royce might make in the future. This week the Government have

published the "pathfinder" or draft prospectus for the company's return to the private sector, and in view of that I must be careful not to say anything that might influence the potential investor, who must make up his or her mind on the basis of the prospectus. We have confidence in the management of the company and believe that Rolls-Royce is well placed for its return to the challenge of the private sector.
The hon. Gentleman made it clear that he did not believe in privatisation and that he would do his best to bring Rolls-Royce back into what he called Government control. He was a bit muddled on that point : half the time he talked about Government control and the other half he claimed that that control would mean that the company was owned by 55 million people. It would no more be owned by 55 million people than the workers in the Tupolev or the Mikoyan factories in the Soviet Union enjoy the facilities which, in an ideal sense, the hon. Gentleman was proclaiming should be the prerogative of the Rolls-Royce workers.
If Rolls-Royce is privatised, the Government will not continue to run it from Whitehall. When the management need to make an investment decision, they will not have to come to Whitehall for approval. I dare say that the hon. Gentleman believes that whenever the trade unions have a grievance they should he able to resolve it through a meeting with Ministers. I suppose that he is not convinced that Rolls-Royce should — or could — live in the international market place, in spite of the way in which its profits are increasing. If the company is to prosper, it must operate in international markets against international competition. It must offer competitive products at a competitive price. It must be as efficient in production as in competition. It must operate quickly and flexibly in reaction to the needs of the market.

Mr. Nellist: Who wrote this?

Mr. Clark: I shall allow the hon. Gentleman to intervene if he wishes. With which of my remarks does he disagree? Does he seriously believe that a company should always be shielded by inexhaustible recourse to taxpayers' money? It is that which causes companies to shrink. Does the hon. Gentleman seriously believe that no company, even one with such a great tradition and as proud an achievement as Rolls-Royce, can afford to be exposed to the draught of international competition?

Mr. Nellist: Does the tone and tenor of the past 30 seconds of the Minister's reply mean that, following privatisation, there will be no public money available to Rolls-Royce because it will then be exposed to the pressures of international competition and will have to stand on its own two feet? Is that what he is saying?

Mr. Clark: Rolls-Royce is well able to stand on its own two feet, and has effectively been doing so for the past years. That is reflected in the enormous increase in its orders and the way in which its engines have spread across the world's airlines and defence forces, and in the increase in its profits over the past three years. It is for this reason that privatisation is so important. The company chairman, Sir Francis Tombs, said earlier this week,
The Government's timescales and objectives arc different from those of a long-term capital goods company.
So long as the company is owned by the Government, it will have another layer of decision making which cannot be helpful to it.
The hon. Gentleman has asked why we should take the risk of privatising Rolls-Royce and has suggested that the taxpayer should be allowed the benefit of his investment in the company. The taxpayer will be getting a return on his investment through the proceeds of the sale. If an individual taxpayer wishes to continue to invest in the company, there is an excellent opportunity for him to do so through the share offer. I cannot agree that we are taking extra risks through the privatisation. We are privatising the company because we believe that it will do better in the private sector than in the public sector. It is not immune from commercial risks, but nor would it be in the public sector.
The fact that a company is in public ownership has never been a guarantee of employment. Publicly owned concerns are not giant taxpayer-funded job-creation schemes. There have been a number of job losses in Rolls-Royce over the past few years as the company has improved its productivity. Public ownership has provided no security of job. It is only by competing effectively and increasing market share that companies can provide greater job security. I believe, therefore, that privatisation and not state ownership is in the best interests of employees. I know that the hon. Gentleman takes a diametrically opposite view, but had the Jaguar company been in his constituency, would be have argued — I suspect strongly that he would —fervently and repeatedly that privatisation would harm the company and the prospects of its employees?

Mr. Nellist: We have not seen the end result of privatisation. The Minister has mentioned the Jaguar

company, which is very much dependent on the American export market. As the falling price of the dollar works its way through the system over the next few months, there will be interesting developments in the company's future. Jaguar, like Rolls-Royce, has had huge amounts of public money pumped into it, and despite the sacrifices that have been made by the work force in bringing the company back on its feet, the rewards are to be given to the speculators.
There is one difference between Jaguar and Rolls-Royce—I know something about the car that is made in Coventry, and I hope that when we next debate these matters the Department will find a Ministerr who knows his brief rather better than the Minister of Trade—and that is development costs. It costs only about £20 million to develop a new car while it costs about $3,000 million to develop a new aero engine.

Mr. Clark: The hon. Gentleman has raised matters that are for the company and not for Ministers and has ignored the fact that the company is no longer, as it was in 1971, based heavily on the performance of one engine. It is much more widely based now with a wide product range. It has the opportunity to develop on several fronts at once and to ride individual storms. The Government will continue to have an important and direct relationship in a number of ways with Rolls-Royce. The Ministry of Defence will undoubtedly remain a major customer and both the Ministry of Defence and my Department will maintain a key interest in the company's research and development programmes and, no doubt, will continue to be involved directly with Rolls-Royce in those programmes. The partnership which we have enjoyed in recent years will still exist after privatisation.

Business Debts (Late Payment)

2 pm

Mr. Richard Ottaway: This is possibly the last debate before the election when I shall have an opportunity to raise this subject. My hon. Friend the Under-Secretary of State and I have discussed this topic more than once. I am pleased that this time we are debating it at two o'clock in the afternoon rather than at 4.30 in the morning, as we did when we last had a chance to consider it.
We recognise that this serious problem of the late payment of debt affects a large number of people from a large number of areas. We recognise especially that industry has a serious problem. It manifests itself primarily as a cash flow problem. It is obvious that, if a firm cannot be paid, its cash flow is affected. Of the 22,000 bankruptcies last year, a substantial number—I cannot be precise—were due to cash flow problems rather than simply insolvency.
On Monday this week, Sir Charles Villiers, a former chief executive of the British Steel Corporation, said at a press conference organised by the Forum of Private Business that the two biggest problems that small firms have to encounter when considering their cash flow were taxation—primarily because of present legislation which requires quick payment—and the late payment of debts. He estimated that, of the 2,500 suppliers to British Steel during his stewardship, 500 went out of business simply because they were not able to get debts paid. He came up with a revealing statement, which is pertinent to the Government's code and guidelines on the late payment of debts. Knowing British business men as he does, he said that they will not change their attitudes to anything, let alone late payment of debts, until they are forced to do so.
I do not wish to he critical of the Government's code, but its weakness is that it is voluntary. It is a good code and I do not believe that any business man, lawyer or anyone involved in these matters can argue with any statement in it. My right hon. Friend the Secretary of State has announced that the code will be revised, and I look forward to reading that revision. If I have one criticism, it is that there should be a recommended period for payment, whether it is 30 days or 60 days, or 30 days net or 60 days net. It would be useful if the revision included a recommended period for payment.
I am not convinced that a voluntary code will change the climate of opinion on late payments of debts. It is worth looking at what happened to the CBI pamphlet which was published in 1980, seven years ago, entitled "Payment of Bills—a guide to good practice". The CBI, in its recent report on the late payment of debt, had to admit that the pamphlet had little effect. I venture to suggest that it had no effect, and that the position has even deteriorated.
I am pleased to welcome two recent converts to the debate on the late payment of debts. The first is no less a person than the Archbishop of Canterbury. In an interview with The Times, he said that debt was a symptom of the decline in our personal morality. He said that he thought that the reason was the high technological era in which we live, which had changed the ways in which we communicated. There is something to be said for that. Debt collection has become an impersonal business. One no longer rings up the man with whom one is doing

business and says, "How about sending me a cheque?" One often finds oneself talking to a computer or a recorded message. That is one of many factors involved in this area of debate.
The second convert who perhaps has more influence on this topic is the Chancellor of the Exchequer. In my speech during the Budget debate I referred to this subject. The Chancellor said :
Perhaps the biggest problem faced by the small business man today is the trade customer who is late in paying his bills: so late sometimes that VAT becomes due before the bill has been paid. I can do nothing about late payment: but I can, I hope do something about the VAT problem."— [Official Report, 17 March 1987; Vol. 112, c. 821.]
One could almost imagine that the first sentence had been drafted by my right hon. and noble Friend the Secretary of State for Employment. It is a welcome statement and the measures introduced to help the small businessman were most welcome and, all in all, it was a good budget for small businesses, particularly with reference to the cash accounting for VAT.
However, it is slightly odd for the Chancellor to say that he could not do anything about late payment because that conflicts with the line coming from the Department of Employment, the guidelines of which clearly go towards the argument that one can do something about it. I do not think that it would publish guidelines if it did not believe that they would have some affect. We have to ask ourselves who is right; is it the Treasury or the Department of Employment? There is a clue to that, which will probably come as no surprise to my hon. Friend the Minister as I have suggested it in the past. It is worth noting that the Treasury has introduced penalties for the late payment of VAT. In reply to a written question that I put to the Chancellor, he confirmed that during the period October 1986 to January 1987 the VAT receipts went up by the staggering sum of £500 million. That was in contrast to the similar periods in the two years before where there had been no increase, but a steady contribution to the Treasury.
We understand that the backlog of VAT due to the Treasury will decline as a result of the introduction of penalties for late payment from £1 billion to £250 million. It is well on the way to collecting that backlog. Therefore, in a rather tortuous way I suggest that the Treasury supports the principle of some enforcement behind voluntary codes.
There has been a significant development this week in that Dun and Bradstreet, the world's largest credit collection agency, has published the interim results of a survey that if has embarked upon. The results make interesting reading. It asked what sort of problems people have in the area of late payment of debt. The answer was that 18 per cent. experienced severe problems, 78 per cent. experience some problems and 4 per cent. experienced no problems. Therefore, 96 per cent of those consulted had experienced problems on late payment of debt. The survey then asked those questioned whether they had read the guideines contained in the booklet "Payment on Time". A surprisingly high number, 19 per cent,— I congratulate the Department of Employment on getting through to 19 per cent.—said they had. However, 81 per cent had not read it. More interestingly, the 19 per cent. who had read the booklet were then asked whether the booklet had made an impact, only 6 per cent. were able to answer "Yes". Therefore, 6 per cent. out of a total of 19 per cent. have been influenced by the guidelines. That is a figure of about


I per cent. That shows that 99 per cent. of businessmen in the country have not been influenced by the guidelines. One has onely to imagine onself inside a finance directors office with a pile of bills and the Government's guidelines in one hand and an unhealthy bank balance in the other and ask what would he do. Would he be influenced by the guidelines and make his bank balance worse, or postpone payment for another month. I think that any businessman, as Sir Charles Villiers said, will not do anything unless he has to.
The fourth question put in the survey was whether those questioned supported any legislation in this area. A total of 73 per cent. said that they did and that they believed it should take the shape of interest on the late payment of debts. We have to ask ourselves whether legislation in this area is a good idea. We know that the Treasury believes that it is, for the reasons that I have already given.
It is important to bear in mind that legislation will not conflict with the Government's guidelines. Frankly, I believe that it will give those guidelines teeth. However, many arguments have been put forward against legislation and there has been a drift away from support for guidelines. Why is the introduction of such legislation criticised?
The first argument against such legislation is that it would be interventionist. Many of us on the Conservative Benches are against the nanny state and interventionist legislation, but I do not believe that this legislation represents intervention. It represents regulation of the market place. We have been down this avenue of discussion many times especially in this Parliament, in our discussions of the Financial Services Act 1986. It is important that the City and the general market place are properly regulated.
The second argument put forward against legislation is that it would be more widely used by big firms than small firms and would act to the detriment of the small firms that we are trying to help. Frankly. I do not accept that. If legislation is introduced, it is available to everyone. It is not specifically aimed at the small firm. I believe that if small firms found that they were being pushed by creditors, they would turn round and lean on their debtors. We must also remember that large firms operate trading conditions and credit checks.
Small debtors cannot be slow payers in today's modern industry. Big company suppliers insist upon three trade references and one bank reference before they start supplying goods. Lesser enforcement procedures may also be followed—for example, the utilty companies may cut off services to small firms. Small firms are especially labour-intensive, and small retailers buy for cash. I believe that the introduction of legislation will redress the balance in favour of small businesses rather than the other way.
The Forum of Private Business, in a survey carried out in January 1987, asked its members whether they were in favour of legislation. The results showed that 86 per cent. were in favour and 14 per cent. were against. Recently, the Forum went back to the 14 per cent. to ask why they had said no. Only 11 per cent. of those asked said that they feared they could go bankrupt. Therefore, 11 per cent. of the 14 per cent.—which is 1·5 per cent.—had a fear of

bankruptcy. Therefore, I am not sure that it is a fear of bankruptcy that makes small firms so keen on this legislation.
We must also consider the self-employed, the small, one-man operator who is at the end of the line and who has no creditors, only debtors. It is worth noting that not one survey has been published showing a majority against legislation. The CBI survey showed that 44 per cent. of those questioned would use the legislation and 84 per cent. believed that it would result in the faster payment of bills. I believe that the introduction of legislation would result in a tremendous release of energy—we always serach for that in politics — and will result in a change in the climate in such matters.
The Government have not been unreasonable. The Minister has said that, if my colleagues and I can persuade him that industry wants a change from the guidelines and wants the introduction of some legislation to give those guidelines teeth, he will have an open mind on the topic. I thank the Minister for that positive approach.
Time is running on, but I have a list of trade and professional associations — some 25 supporters — in favour of a change in the Government's attitude to this matter. They are primarily in support of legislation. If I may pick out one or two of those associations they include the Road Haulage Association, the National Farmers Union, the Small Business Bureau, the Federation of Master Builders and the Chartered Institute of Transport. All those organisations have a substantial number of members. Indeed, some 300,000 businesses now support the concept of legislation to deal with this problem.
The other day, my hon. Friend the Minister said in a press release that, of the seven principal lobby groups, only one supported some change to the present law. I do not believe that that is strictly true. If we consider the seven principal looby groups, we can discern a pendulum swing of opinion on this matter.
The Institute of Directors remains against legislation. The Association of Independent Businesses has made no comment. The Union of Independent Companies said this week that it has the situation under review and may have to support legislation unless there is considerable improvement. The Association of British Chambers of Commerce is slightly muddled in its advice. It said that, if legislation is introduced, it will support it provided that it does not result in a change in what is already the law, so I am afraid that we cannot look too much at the association's advice. However, it is worth noting that the Bristol, Plymouth and Nottinghamshire chambers now support a change.
The National Federation of Self-Employed and Small Businesses has begun to show a shift in opinion and is now calling for interest penalties in the county courts. The CBI is in favour of a discretionary change in the law and possibly reviewing the position. As we know, the Forum of Private Business is for legislation. I commend to my hon. Friend the Minister the report that it published this week.
An early day motion has also been tabled on the topic. It is not frivolous, like many that appear on the Order Paper. It now has the support of 183 Members of Parliament, representing 15 million people. One cannot ignore such a substantial number of Members who now believe that there should be a change in our approach.
I thank my hon. Friend the Minister for his interest in this topic during the lifetime of this Parliament. I am pretty


sure that this is the last time that we shall have the chance to discuss it before the election. I shall be interested to hear what he says about it.

The Parliamentary Under-Secretary of State for Employment (Mr. David Trippier): The late payment of business debts, which we are debating today, is in some respects an unusual subject. There is very wide agreement about the existence of the problem and the need to do something about it. At the same time, there is substantial disagreement about the best way of dealing with it.
My hon. Friend the Member for Nottingham, North (Mr. Ottaway) is convinced that further legislation is a necessary part of the solution, and I am not. I do not say, and never have said, that I am rigidly opposed to legislation, but my starting point is that we should not use legislation to dictate to firms, large and small, how they should do business with each other unless the advantages of legislation are quite clear. That point should be common ground to Conservative Members and even to many Opposition Members. As my hon. Friend supports legislation, it seems that he has satisfied himself that the advantages are clear. I must say to him, despite his closing remarks, that I do not believe that he has yet satisfied most of the principal representatives of small business in whose interest he makes his proposals.
I have close contacts with the organisations representing small firms and I have discussed the problem of late payment with them on many occasions. The great majority of them either are opposed to legislation or have serious reservations about its desirability. The National Federation of Self-Employed and Small Businesses, which certainly represents very small businesses, as my hon. Friend will concede, the Association of Independent Businesses, the Association of British Chambers of Commerce, the National Chamber of Trade and, I believe, the smaller firms council of the CBI, have all told the Department or me that they do not support legislation along the lines proposed by my hon. Friend.
For example, I should like to quote from a letter addressed to me by the chairman of the National Federation of Self-Employed and Small Businesses, Mr. Brian Prime, dated 6 March, in which he said :
The Federation has always been reluctant and very cautious over this subject. I felt it was time to confirm our policy on this subject. With this point in mind, it was raised at our February National Council Meeting and after debate Council once more confirmed the Federation's opposition to legislation being introduced that would make interest on late payments of bills mandatory. We feel this would have a more detrimental effect on small business than a beneficial one.

Mr. Ottaway: May I refer my hon. Friend to the manifesto of the National Federation of Self-Employed and Small Businesses, published this week? On page 10 it says that the federation
supports a strengthening of the County Courts system, enabling those bodies to impose discretionary interest penalties".
I agree that that is not exactly what I am saying, but a change in the law is needed to introduce that.

Mr. Trippier: I am grateful to my hon. Friend for stressing that. However, in a number of debates that we have had on this issue, the point has been missed that the Administration of Justice Act 1982 is already on the statute hook. That allows discretionary payment to be

awarded by the courts. That may have been missed from the Dun and Bradstreet survey to which my hon. Friend referred. I maintain—perhaps this is a weakness— that the Government have not made the nation increasingly aware of the fact that the Administration of Justice Act 1982 exists. Perhaps the vast majority of people are unaware of that.
I accept that the National Federation of Self-Employed and Small Businesses is asking for changes at the county courts level. No one disputes that. However, it is not prepared to follow the route down which my hon. Friend is seeking to lead it at this stage. He has referred to the Union of Independent Companies. This morning I spoke to the chairman of the Union of Independent Companies, Mr. Barry Baldwin. My hon. Friend is absolutely right to say that the union is keeping the matter under constant review. I understand that that statement was made by the vice-chairman. He said :
It may have to support legislation unless the situation improves considerably.
The chairman volunteered the information to me that it was unlikely that the union would ever take that step, but he would certainly stand by something which my hon. Friend would welcome— the fact that the union would certainly keep the position under review.
I query this point not because I doubt anything that my hon. Friend has said, because I know that he speaks with some authority on these matters. If we refer to the case put forward by the Forum of Private Business—for which I have a great deal of time and respect; I tend to agree with the vast majority of what it says—the forum claims at the back of its booklet to have the support of the Federation of Master Builders. It does not. I have a letter from Mr. Bill Hilton dated 5 February — relatively recently—which clearly makes the point :
as you have previously maintained, there could be serious disadvantages arising from such legislation in the absence of certain safeguards. And when does payment become 'late'?
I could quote from various letters that I have received only recently.
I am not prepared to take on the Archbishop of Canterbury; and my hon. Friend would not expect me to do that. However, if I take time out, as I am prepared to, to study what the Archbishop said—

Mr. Ottaway: What about the Chancellor of the Exchequer?

Mr. Trippier: If my hon. Friend reads the case laid out by my right hon. Friend the Chancellor of the Exchequer in his Budget speech, he will discover that my right hon. Friend's case supports my position.
My hon. Friend was kind enough to say that at least I have kept the door open. I will refer to that later in my speech. However, to paraphrase my right hon. Friend the Chancellor, he said that he could do nothing about late payment. With the Administration of Justice Act 1982 and the code of practice, we have shown that we are doing all we possibly can to help. We are not prepared, however, to go as far at this stage as my hon. Friend has suggested.
Other organisations with a strong representation among small businesses, such as the Institute of Directors, have also expressed their concern and opposition, as has the Institute of Credit Management, whose members have practical experience of the problem. I am tempted to say that there is a consensus of informed opinion against my hon. Friend's proposals, but I recognise that they find a measure of support. It would be foolish to say otherwise.
The Forum of Private Business in particular has campaigned vigorously for legislation in that area, and I accept that it is not without allies. I must congratulate the forum and my hon. Friend on their determination to bring this problem to the forefront of public attention where it belongs. At the same time, I hope that I have made it clear that their support for legislation remains in my view a minority opinion among those who have considered the problem in depth.
I have said publicly, and repeat again now, that I attach great value to the views of the organisations representing small businesses. If they were to give their firm backing to my hon. Friend's approach, I would take their views very seriously indeed. My hon. Friend referred to hon. Members who have signed the early-day motion. I respect that, but I find it hard to believe that, where the arguments have not been explained in some detail, hon. Members would wish to support a proposal that is opposed by the small firms lobby groups which represent the vast majority of people in the small firms constituency. Perhaps it would be wise if, after the debate, I sent them copies of Hansard reports of this and other debates on the matter.
Having stated where I disagree with my hon. Friend, I should emphasise the substantial areas of agreement. First, we agree that there is a serious problem. During my time as Minister responsible for small firms, few issues have struck me as forcibly as this. At the best of times, many small firms have cash flow problems, and late payment of bills by their customers makes a bad position worse. If the small firm is lucky enough to have a sympathetic bank manager, it may be able to borrow to help it through its difficulties, but the cost in interest charges and in the reduction of funds available for other purposes makes that a far from ideal solution. In addition to the financial strain, there is an extra burden on management time. Small business men already have enough roles to play without becoming debt collectors.
We agree that there is a problem. We also agree that, to solve the problem, above all we need a major change in attitudes and practices. Those who advocate legislation believe that it will have a helpful effect on attitudes and practices. Those who oppose it, or are sceptical about it, doubt whether it will be helpful. Some think it will be harmful. But there is general agreement that legislation will be useful only if it encourages a change in attitudes and practices. Merely to give the victims of late payment an additional means of redress will bring only a very marginal benefit if it does not have a much wider effect in deterring bad practices and encouraging good ones.
It is important that the problem of late payment should not be oversimplified. It is not, as is sometimes suggested, simply a matter of large firms deliberately delaying payment as a means of improving their cash flow and investment income at the expense of their smaller suppliers. Where that happens, it is, of course utterly deplorable. But there are other reasons for delay, bureaucratic inertia, cumbersome payment systems, and disputes over contract performance among them. Although I receive many complaints about late payment, relatively few of them are straightforward cases of

unwillingness to pay on time. Often there is a dispute about the quantity or quality of goods supplied. In other cases, the complaint is about the terms of contract themselves, where one party considers the payment clauses unreasonable. I am bound to be influenced by this experience in forming my views on legislation, which seems to offer a simple solution to what is often a complex problem.
I must also emphasise that a change in attitudes and practices is needed among small firms. At least part of their problem is often due to lack of thought at the stage of contract or invoicing, or to inadequate systems of credit control. If the contract or the invoice does not make it clear when payment is required, it is not surprising if payment takes longer than the supplier would like.
The public sector, too, has come in for some criticism. But if I refer to the fairly recent CHI survey, I gain some comfort from the knowledge that only 5 per cent. of respondents felt that central and local government bodies are the worst payers. That does not mean that there is any room for complacency. Far from it. It is important that I stress yet again in public that I am willing to take up cases of late payment involving Government Departments. I am pleased to say that my intervention has often been effective.
So much for the nature of the problem. What can the Government do to help towards a solution? I am glad that the title for our debate refers to the Government's guidance, because we have indeed given guidance. Last year, in conjunction with the CBI, the Association of British Chambers of Commerce, the Institute of Directors and the Institute of Purchasing and Supply, my Department issued the booklet "Payment on Time". The booklet has been much in demand, with 150,000 copies distributed, and requests for more copies continue to arrive. I am not discouraged by surveys purporting to show that the booklet has had no impact. I know, for instance, that a Dun and Bradstreet survey has found that only 19 per cent. of those surveyed had read the booklet. By the standards of most Government advice booklets, I suspect that that makes it a best seller. My estimate of the size of the small business constituency is more than 4 million. One fifth of that would mean that about 800,000 copies of my code have found their way into the hands of small business men. As only 150,000 have been made available, someone else must be printing them. I only hope that it is a small firm, but I should like to know who is paying.
I recognise that the code is not the end of the story, but my hon. Friend has been kind enough to refer to the new initiative that I announced this week, which will update the code and print some of the replies that I have received from the chairmen of the larger companies.
Strange though it may seem, I welcome the opportunity that we have had to debate the issue again; I welcome any initiatives that keep the issue in the spotlight. The need for improvements is not in dispute. However, there is room for general disagreement about how to achieve them, and I still believe that co-operation is better than coercion.

It being half-past Two o'clock, the motion for the Adjournment of the House lapsed, without Question put.

Crown Land (Gillingham)

Motion made and Question proposed, That this House do now adjourn—[Mr. Ryder.]

Mr. James Couchman: I am very pleased to have the second opportunity in four months to discuss the conservation of the environment in my constituency. I am particularly pleased to have a chance of bringing up to date my hon. Friend the Parliamentary Under-Secretary of State for the Environment on the matters that we discussed during my Consolidated Fund debate at 3 am on Tuesday 16 December last year. I am mindful that my hon. Friend has already had to respond to two debates today, and I hope that I shall not test him too much.
In that Consolidated Fund debate, we discussed the proposed sale of 48 acres of redundant but undeveloped land in the tenure of the Ministry of Defence known as the Great Lines, Brompton, Gillingham. This afternoon I shall try to widen the scope of my remarks to include other redundant Crown land in Gillingham. I shall try not to repeat my earlier comments, although the Great Lines remains the most contentious area of land as yet undeveloped in the ownership of the Crown and likely to be sold by the Property Services Agency, acting as the Government's estate agent.
Since my hon. Friend and I last discussed the Great Lines, the attitudes of both Gillingham borough council and the PSA have hardened. The council has yet to determine the PSA's over-ambitious planning application for the residential development of 14 acres of the Great Lines, because it has been awaiting a promised amended application from the PSA that has never materialised. At its meeting on 3 February this year, however, the council resolved as follows:
This council, recognising the Property Services Agency's apparent determination to pursue an application for development on the Great Lines, re-affirms its policy of preserving the whole area as a designated open space and supports and congratulates the Member of Parliament in securing an adjournment debate on that subject in the House of Commons.
The full council, at its meeting on 28 April this year, will determine the PSA's application because the PSA has demanded that the council should determine the original application now. It needs no prophet or seer to predict the outcome of that determination.
As I said a moment ago, the relationship between the council and the PSA has worsened. That is indicated by a dialogue between the PSA's district estate surveyor, Mr. J. F. Thompson and the council's new chief executive, Dr. Chilton. Dr. Chilton, keen to know the provenance of the MOD's tenure of the land, requested a sight of the original conveyances and/or the Acts of Parliament by which the land came into the Crown's ownership. Mr. Thompson's response in a letter dated 22 January this year was uncompromising and, I think unhelpful. It ran as follows:
I refer to your letter of 19th December and our subsequent telephone conversation and would confirm that at the present time policy constraints are such that it is almost inevitable that the subject area of land will be offered for sale on the open market, either by auction or tender and therefore a sale to your Authority should not be regarded as a real possibility.
The documentation that has been requested is not that which we would generally circulate and will in fact only be available to a successful purchaser to enable the legal formalities to be completed. As you will fully appreciate there

is at present a planning application before the Council for residential development on part of the land and we are awaiting your response to my letter dated 12th December; however, you will, no doubt, be shortly forwarding details of the proposals for the area which are considered by your Council to be acceptable.
After consultation with the council's sub-committee that was set up specifically to consider the matter, Dr. Chilton replied, in a letter of 19 February 1987, as follows:
They"—
that is the sub-committee—
propose to obtain Counsel's opinion on any means of preventing the disposal for development of this part of the Great Lines. From their knowledge of the history of the area they consider that there is a possibility that there were restrictions in the original conveyances of the Great Lines, or in the Acts of Parliament authorising those conveyances to the Government, which prevent the Government from disposing of the area for development, and they want this fully investigated. It is for this purpose that I need copies of the original conveyances which I have already asked you to let me have. I reported your response to the Sub-Committee and they instructed me to request you to provide this copy documentation and a note of the Acts of Parliament under which the conveyances were authorised, within 14 days, and to inform you that if you fail to do so the Member of Parliament will be asked to raise questions in the House of Commons about the matter.
Dr. Chilton still awaits a reply to that letter.
The Great Lines is by far the most controversial piece of redundant Ministry of Defence land, and the council has set its face against the development of any of it. I am pleased to play my part in that fight against development. I share the council's belief that there may well be covenants in the original conveyances that favour the council's stand. I am also concerned to know whether the Ministry of Defence or the Property Services Agency, acting as estate agent, has fulfilled its obligations under the Crichel Down rules. Have the heirs to the original owners been sought?
There is another intriguing possibility. Was any part of this land common land before its appropriation by the Crown? If that were so, the claim that the Great Lines should remain as a public open space for the benefit of the good people of Gillingham and Chatham would be irresistable. It could even be transferred to an organisation of commoners. In any case, Gillingham borough council and Rochester-on-Medway city council are likely to be urged to declare the Great Lines as public open space on the draft local plan that is now in the course of preparation. In this European Year of the Environment, it would even be appropriate to declare the Great Lines a development-free zone, to use the common parlance of the day.
Within the last few hours, information has been given to me that gives me cause for great hope, and I should like my hon. Friend the Minister to listen particularly carefully to this. Notwithstanding the obduracy and obstruction of the PSA, I have been able to turn up the original Act of Parliament of 1709 by which the lands for "better fortifying and securing the harbours and docks" at Portsmouth, Chatham and Harwich were conveyed. They include the relevant land. My source, from the House of Commons Library, is Statutes at Large, Volume IV, published in 1811, page 60. That Act of Parliament is still in force, and since it dealt with the conveyance of land there is no reason why it should ever have been repealed. Clause 4 reads as follows:
And be it further enacted by the Authority aforesaid, That no private Building or Buildings shall be made or erected upon any of the Lands vested in Her Majesty"—


that is Queen Anne>—
as aforesaid; and that the whole Profits arising, or that shall hereafter arise from the same, be and are hereby appropriated and applied for and towards the Erection and Reparations of the respective Fortifications of each Place; and all and singular the Premisses shall be and are hereby enacted and declared to be unalienable from the Crown, neither shall any Part of the Premisses be demised or demisable, otherwise than during Pleasure only.
No wonder the PSA did not want to release the papers to the council, because it seems to me that the sale of the Great Lines, and much other land besides in Portsmouth, Chatham and Harwich, for the development of private housing would be illegal on two counts.
Clause 4 of the 1709 Act clearly places a statutory prohibition on the erection of private buildings and also prohibits disposal of the land by the Crown. The illegality of the proposed sale of the Great Lines for development will not be lost on my hon. Friend, who is himself a fine lawyer. I suggest that the Great Lines could legally be leased as open space to the council and that a rent of one peppercorn per year would be appropriate.
I said that I would widen the scope of my remarks beyond the Great Lines. Another highly contentious planning application is currently winging its way towards my right hon. Friend the Secretary of State for the Environment, on appeal. I do not expect my hon. Friend to comment on it. One of the few substantial deciduous woods left in Gillingham or, indeed, in the Medway towns, is known as East Hoath woods and is threatened with destruction. The regional health authority, which owns the land, is seeking permission to build a facility for the mentally handicapped on part of that land. That is not opposed. However, it seeks also to develop the remainder for houses. The council refused planning permission for the housing in the hope of saving part of the woods. Unfortunately, a long out-of-date town plan, which zones the area as residential in preference to the alternative, which was then light industrial, makes an appeal difficult to resist. With a heightened awareness of the preciousness of undeveloped land, my constituents are hoping against hope that my right hon. Friend the Secretary of State will not allow an appeal on that application.
Along the banks of the Medway, and through the northern strip of my constituency, there is a sizeable area of agricultural land, much of it not very intensively farmed. The pessimists locally already see a growing pressure for residential development, because already the ownership of some of that land is what might best be called speculative. The council, a little in the mould of Canute, has bought an area alongside the Medway at Motney hill and is creating a riverside country park. However, all around the pressure, mainly from outsiders with no strong attachment to Gillingham, is for development.
It is for these reasons that I urge my hon. Friend, with his responsibility for the PSA, to call in the whole matter of redundant MOD land in Gillingham and the Medway towns, to suspend any further progress of the planning application on the Great Lines, and to instruct his officials at the PSA to sit down with the Gillingham borough council, in the hope that by discussing "in the round", and in total, the entire likely redundant land holdings of the MOD, both parties can co-operate in achieving a felicitous

outcome, with development where that is sensible, and with conservation where natural justice and common sense demand it.
The Government have a heavy responsibility to the local population in the disposal of their redundant Crown land. That responsibility must not be sacrificed in the interests of short-term land profit. The Medway towns have given too much, over too many years in the service of the Crown for their opinions on the development of Crown land in the towns to be ignored. They will not allow officials of the PSA to ride roughshod over them in this matter.
I am not against all development. I am not a member of the "never a blade of grass shall be touched" tendency, far from it. I rejoice at the prospect of the great development in the former naval base, which is being undertaken by English Estates. That will be a considerable asset when it is completed. However, that great development, which offers so much in potential employment, housing and leisure must be balanced by the sensible retention of "green lungs" and woodlands nearby.
Every acre of green land and woodland, which is sacrificed to concrete, bricks and mortar, is gone for ever. My right hon. Friend and hon. Friends at the Department of the Environment shoulder a heavy burden in maintaining the balance between development and conservation. I understand the message that my right hon. Friend the Secretary of State delivered when he spoke in Cambridge this week to the delegates at the Nature Conservancy Council's first national conference to mark European Year of the Environment. However, in assessing redundant MOD land in Gillingham, it is without doubt that the Great Lines are worth conserving; whereas much of the other land in the Ministry's tenure would benefit from development. Indeed, Gillingham council has suggested its willingness to consider favourably the development of its surplus Government land in return for the conservation of the Great Lines. That was made clear by Dr. Chilton in his letter to Mr. Thompson of 19 February.
May I conclude by asking my hon. Friend to redeem his promise of 16 December 1986 and come to Gillingham to see the Great Lines and other surplus land whether the MOD has yet declared it so or not. I feel certain that he will then see the merit of my case and the council's aspiration to avoid the loss of a priceless and well-loved recreational area in my constituency.

The Parliamentary Under-Secretary of State for the Environment (Mr. Christopher Chope): I congratulate my hon. Friend the Member for Gillingham (Mr. Couchman) on deploying his arguments forcefully on behalf of his constituents. I listened with interest to the points that he raised and the eloquent way in which he read from ancient statutes. I shall ask my officials to read them so that they can advise me whether the implications of the statutes are as my hon. Friend described them.
The Crichel Down code does not apply, and has never applied, to land purchased before 1935. My hon. Friend accepts that the great lines were acquired long before 1935 and, indeed, in the early 18th and 19th centuries. I hope he will accept that the Crichel Down issue is a red herring, even if some other matters have yet to be proved such.
There are substantial areas of Crown land in the Gillingham area and its surroundings which are owned by


the Ministry of Defence. Some of this is undeveloped, and I am aware of my hon. Friend's view that there is a need for a strategy to be established for its future, with the MOD, the PSA and the local planning authority working together in the public interest.
I must make one thing clear straight away. Whether or not this land owned by the MOD should be retained in its present state, developed for defence purposes or declared surplus to that Department's needs is entirely a matter for my right hon. Friend the Secretary of State for Defence. It would be inappropriate for me to comment during this debate on propositions that the MOD should or should not make its operational decisions in particular ways or with particular non-defence aims in mind.
Nevertheless, when any development or redevelopment is proposed this is carefully considered by the Ministry of Defence in consultation with the PSA and normally, at an appropriate stage, informal discussions take place with the local planning authority. These discussions are usually tripartite in the sense that they include MOD specialists, representing the defence interests, PSA officials, as the MOD's professional advisers, and planning officials, and in major cases the chairman and members of the planning committee representing the local planning authority. This is, given good will on all sides, conducted in a spirit of co-operation and mutual understanding of each others' interests. These informal discussions are then followed by a formal written consultation which is considered and dealt with by the relevant planning committee. I must emphasise that operational proposals are, for obvious reasons, initiated by the MOD—that is its business—while consideration of local planning issues and policy is in the first instance the business of the local planning authority.
These formal consultations with local planning authorities are part of a non-statutory procedure which is invariably followed by all Government Departments before engaging in any activity which would require planning permission if it were to be carried out by a private sector body or individual. In the case of proposed development or a change of use by the MOD, the planning consultations are normally carried out on its behalf by the PSA.
That, then, is the position on development proposals. When, on the other hand, the Ministry of Defence decides that land is surplus to its operational requirements it is handed to the PSA for disposal: the normal procedures then are that it is sold on the open market for the best price. That is Government policy. It is not wholly inflexible and it is always open to hon. Members, local planning authorities or individuals to seek to persuade me to vary the rules. Nevertheless, an open market sale is the usual method of disposal and sales of land by private treaty to public bodies, such as water authorities, electricity boards, and local authorities, are permitted only where the authority concerned demonstrates an overriding need to acquire the property to meet operational requirements to fulfil its proper and necessary statutory obligations. In the case of the Great Lines, my predecessor and I have made it clear on numerous occasions that we have yet to be persuaded that Gillingham borough council has such a need and, on my instructions, the PSA has been proceeding with an open market sale.
Perhaps I should at this point explain that while where development by Government Departments is proposed, a non-statutory consultation takes place, when it is

proposed to sell Government-owned property a normal statutory planning application is now legally acceptable since the enactment of the Town and Country Planning Act 1984. This is what has been happening in respect of Great Lines, and I understand that the PSA is still awaiting a formal decision on this. My hon. Friend confirmed that, although he has said that he knows exactly what the decision will be. It is an odd state of affairs that everybody seems to know exactly what will be decided in a committee that has not yet met.

Mr. Couchman: I do not know what that decision will be. I said that I would feel that no great foresight was needed to see what the decision was likely to be.

Mr. Chope: I apologise if I misrepresented what my hon. Friend said. I looked at the substance of what he was saying and thought that he meant that the matter was decided already. From my point of view, and that of the PSA, we have to wait to see what the decision is and then decide what action we should take. I am told that that meeting is on 28 April, and assuming that the decision follows the council's recently stated opposition to any development on the site, this leaves me with a choice of either instructing the PSA to take the matter to appeal or instructing its marketing agents to sell on the open market.
My hon. Friend has asked me to go to look at the Great Lines myself and I said in December that I would do so. I thought that it would be better if I waited until the outcome of the planning application has been determined. In December, I expected that that would be February, and My hon. Friend said then that that was likely. We now know that it will not be determined until the end of the month, but I assure my hon. Friend that I have asked my Office to make the necessary arrangements for a visit. We have had a discussion about this, and I hope that my visit will be able to take place within the next few weeks.
As regards future disposals, it would always he the PSA's intention to discuss strategies with local planning authorities where such discussion seems likely to be fruitful. For example, the MOD is at present considering the release of land at Lower Lines in Gillingham and, although the extent of the land to be released is still under consideration within the MOD, the PSA has instructed agents to enter into preliminary discussions with local planning officials in the hope that constructive proposals will emerge prior to a planning application being submitted.
Of course, each planning application — or consultation about development—must be treated on its own merits, bearing in mind any local or strategic plans which!, exist or are being formulated by the local planning authority. On these, the PSA — usually the local PSA estate surveyor and his MOD or armed service colleagues — will willingly participate in any discussions in connection with the formulation of plans, clearly reserving the right to object to proposals when draft plans are issued and to vary stated positions in the light of changed or changing operational requirements.
Should the MOD decide to release substantial areas of land in the Gillingham area—I am not suggesting that it will, I do not know, as I say, that is a matter for my right hon. Friend the Secretary of State for Defence — then there would be no question but that the PSA—following the precedent of the Chatham dockyard disposal —would seek to evolve a sensible and rational programme


of land release and disposal, taking fully into account the wishes and ambitions of local people and the planning authorities. The Chatham dockyard disposal was an exceptional case that required exceptional measures, and the successful implementation of its disposal was due, in no small way, to the excellent co-operation between local and central Government— ably supported by the local hon. Members—in formulating a future policy for land use which minimised the impact on the local community and which will in the long term ultimately benefit the Medway towns.
Considerable business is now passing through the area transferred to the Medway (Chatham) Dock Company— a subsidiary of the Medway Ports Authority. I understand that English Estates is working closely with the local planning departments in formulating future plans —for example the proposal that the Tropical Research Institute, which is the responsibility of my hon. Friend the Minister for Overseas Development, should be rehoused in the fine buildings that were formerly known as HMS Pembroke. There is also the historic dockyard where the trust jointly formed by my right hon. Friends the Secretaries of State for Defence and for the Environment is working on what promises to be a major tourist attraction.
My hon. Friend mentioned conservation. On existing undeveloped areas of land, including woodland, the Ministry of Defence has an impressive conservation record. In saying this, I am not commenting on the planning application about some area health authority land that is before my right hon. Friend the Secretary of State for the Environment. As my hon. Friend has said, it would be inappropriate for me to do so. In the Gillingham area, the local conservation group is run by the Army with expert advisers from the Nature Conservancy Council, the Kent Trust for Nature Conservation, and Maidstone museum. The MOD conservation officer frequently attends and the PSA's estate surveyor participates in the discussions and helps to carry out many of the recommendations.
The group meets four or five times a year and there are also regular field meetings. Most of the matters discussed affect the Chatham area on the Isle of Grain, a few miles north of Gillingham on the other side of the Medway in the constituency of my hon. Friend the Member for Gravesham (Mr. Brinton). Recent meetings have discussed, for instance, a land management plan for the training areas, which included a forestry plan designed to improve, this and, where appropriate, replant woodland at Chattenden in accordance with a five-year plan. A site dossier is being compiled listing species of flora and fauna found on defence land locally; any rare or endangered species will, of course, be closely monitored by the group.
Other matters that have recently been the subject of discussion by the group include orchids in Chattenden wood, sites of special scientific interest on Army training areas, and liaison with other local conservation societies. In order to make known its activities, the group proposes to have a stand at the local Army open day.
Apart from the Chattenden area, there are also undeveloped areas in and around Gillingham. We have discussed Great Lines and Lower Lines. There is also the ancient moat, at present being restored as part of the community programme—sponsored by the Army and organised by the National Council for the Rehabilitation of Offenders. That is a considerable and important task, as the moat is an important feature of the original defences of the royal naval dockyard and passes through what is now the royal school of military engineering's establishment at Brompton barracks.
My Department and the Ministry of Defence take an interest in conservation in my hon. Friend's constituency and that is why we are particularly disappointed by the breakdown in relations with local planning department officials following the meeting on 3 December. I understand that at that meeting is was agreed in principle that some amendments would be made to the planning application, but that when PSA agents tried to discuss the matter in detail, the planning officials were not prepared to do that and attempted to divert the discussion to wider issues of land use and the release of land by the Ministry of Defence. The agents are clearly not competent to deal with those issues, for the reasons that I have set out.
The PSA officials have tried to maintain a co-operative relationship with the borough officials and I have instructed PSA staff that they should continue to do so. However, that will not be helped if the council will not accept that the sale by private treaty at open space value is not possible.
To sum up, there are properly established arrangements for consulting local interests about development proposals, conservation matters and disposal strategies. Those must be tailored to individual circumstances, but there is never any question of the MOD or the PSA riding roughshod over local interests. Nevertheless, I have to say again that it must be for the MOD to make decisions about the use of defence land, at Gillingham or anywhere else.
I look forward to my visit to my hon. Friend's constituency after the Easter recess. As I have had the privilege of replying to the final Adjournment debate before Easter, I conclude by wishing you,Mr. Deputy Speaker, and the Officials of the House a happy and enjoyable Recess.

Question put and agreed to.

Adjourned accordingly at three minutes to Three o'clock till Wednesday 22 April, pursuant to the resolution of the House [2 April].